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The Impact of Place-Based Employment Tax Credits on Local Labor: Evidence from Tax Data

Listed author(s):
  • Tong, Patricia

    ()

    (US Department of the Treasury)

  • Zhou, Li

    ()

    (University of Alberta, Department of Economics)

Registered author(s):

Using administrative tax data that contain information on firm credit take-up and employee residence, we examine the impact of the Empowerment Zone and Renewal Community employment tax credits on local labor. We find modest evidence that zone designation improves labor market outcomes among residents. However, when we specifically estimate the impact of the place-based employment tax credit and disentangle the impact based on where workers live and work, we find strong evidence that the employment tax credits have significant and positive impacts on both zone and non-zone residents employed at firms that claim these credits. We determine that firms claiming the employment tax credit represent a small share of the overall labor demand of zone residents. As a result, utilizing data that include information on which firms receive place-based tax incentives is crucial to evaluate how these policies impact local labor, and evaluations looking at outcomes of broader populations may not be able to identify significant improvements in outcomes if a limited fraction of the population is directly affected.

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File URL: https://sites.ualberta.ca/~econwps/2014/wp2014-06.pdf
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Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2014-6.

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Length: 43 pages
Date of creation: 01 Jul 2014
Handle: RePEc:ris:albaec:2014_006
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  1. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2012. "Do unemployed workers benefit from enterprise zones? The French experience," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 881-892.
  2. Bondonio, Daniele & Engberg, John, 2000. "Enterprise zones and local employment: evidence from the states' programs," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 519-549, September.
  3. Robert T. Greenbaum & John B. Engberg, 2004. "The impact of state enterprise zones on urban manufacturing establishments," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(2), pages 315-339.
  4. Hanson, Andrew & Rohlin, Shawn, 2013. "Do spatially targeted redevelopment programs spillover?," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 86-100.
  5. Givord, Pauline & Rathelot, Roland & Sillard, Patrick, 2013. "Place-based tax exemptions and displacement effects: An evaluation of the Zones Franches Urbaines program," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 151-163.
  6. Leslie E. Papke, 1993. "What Do We Know about Enterprise Zones?," NBER Chapters,in: Tax Policy and the Economy, Volume 7, pages 37-72 National Bureau of Economic Research, Inc.
  7. Matthew Freedman, 2013. "Targeted Business Incentives and Local Labor Markets," Journal of Human Resources, University of Wisconsin Press, vol. 48(2), pages 311-344.
  8. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, vol. 103(2), pages 897-947, April.
  9. Joel A. Elvery, 2009. "The Impact of Enterprise Zones on Resident Employment," Economic Development Quarterly, , vol. 23(1), pages 44-59, February.
  10. Freedman, Matthew, 2012. "Teaching new markets old tricks: The effects of subsidized investment on low-income neighborhoods," Journal of Public Economics, Elsevier, vol. 96(11), pages 1000-1014.
  11. Devon Lynch & Jeffrey S. Zax, 2011. "Incidence and Substitution in Enterprise Zone Programs: The Case of Colorado," Public Finance Review, , vol. 39(2), pages 226-255, March.
  12. Bondonio, Daniele & Greenbaum, Robert T., 2007. "Do local tax incentives affect economic growth? What mean impacts miss in the analysis of enterprise zone policies," Regional Science and Urban Economics, Elsevier, vol. 37(1), pages 121-136, January.
  13. Andrew Hanson & Shawn Rohlin, 2011. "Do Location‐Based Tax Incentives Attract New Business Establishments?," Journal of Regional Science, Wiley Blackwell, vol. 51(3), pages 427-449, August.
  14. Neumark, David & Kolko, Jed, 2010. "Do enterprise zones create jobs? Evidence from California's enterprise zone program," Journal of Urban Economics, Elsevier, vol. 68(1), pages 1-19, July.
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