IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

A Long-Term Evaluation of the First Generation of the French Urban Enterprise Zones

  • Corentin Trevien
  • Pauline Givord
  • Simon Quantin

This paper provides new empirical evidence on the long-run efficiency of locally targeted tax incentives in revitalizing distressed areas. We focus on the first generation of the French “Enterprise Zone†(EZ) initiative, implemented in 1997 in continental France. This program provides tax incentives to firms located in designated areas plagued by social and economic difficulties. Compared to EZs in the US and the UK, French Enterprise Zones offer generous tax reductions, but these subsidies are limited to small firms with less than fifty employees. To our knowledge, the first generation of French EZs has not yet been evaluated on a national scale. A very rich georeferenced panel dataset is used to identify the impact of the EZ policy. Our identification strategy relies on the selection mechanism employed by the French government: designated EZs were selected according to a deprivation index based on various socio-economic criteria. Besides, in order to qualify as an EZ, an urban area must have a population of over 10,000. Consequently, a pool of deprived urban areas was left untreated because of this threshold whereas it was similar to selected areas in terms of economic development. We use two different empirical methods: a combination of regression and sub-classification on the propensity score, and a regression discontinuity design method. Both methods yield similar results. We highlight a strong positive impact of this policy on employment and business location during the first years of the policy. Detailed estimates moderate this initial favourable assessment. First, the EZ effect is partially offset after the initial five-year period of full tax exemptions by more frequent business discontinuations. We simulate actual tax reliefs at a firm-level at the beginning of the policy and ten years after in order to explain this waning effect. We highlight the fact that the introduction of generous payroll tax deductions at a national scale in 2003 reduced the attractiveness of targeted areas. Second, while firms already operating also benefit from tax exemptions, no significant impact on their employment level can be detected. Besides, this policy promotes sectors of activity that weakly stimulate local employment and development. Overall, these results suggest that firms are sensitive to tax cuts but call into question the capacity of EZs to improve local economy. Keywords: Enterprise Zones, Local Employment, Propensity Score Matching, Evaluation. JEL: C23, H71, R5

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa12/e120821aFinal00778.pdf
Download Restriction: no

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa12p776.

as
in new window

Length:
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:wiw:wiwrsa:ersa12p776
Contact details of provider: Postal: Welthandelsplatz 1, 1020 Vienna, Austria
Web page: http://www.ersa.org

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Roland Rathelot & Patrick Sillard, 2008. "The Importance of Local Corporate Taxes in Business Location Decisions: Evidence From French Micro Data," Economic Journal, Royal Economic Society, vol. 118(527), pages 499-514, 03.
  2. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2012. "Do Unemployed Workers Benefit from Enterprise Zones? The French Experience," IZA Discussion Papers 6357, Institute for the Study of Labor (IZA).
  3. Battistin, Erich & Rettore, Enrico, 2008. "Ineligibles and eligible non-participants as a double comparison group in regression-discontinuity designs," Journal of Econometrics, Elsevier, vol. 142(2), pages 715-730, February.
  4. P. Givord & R. Rathelot & P. Sillard, 2011. "Place-based tax exemptions and displacement effects: An evaluation of the Zones Franches Urbaines program," Documents de Travail de la DESE - Working Papers of the DESE g2011-13, Institut National de la Statistique et des Etudes Economiques, DESE.
  5. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 261-94, April.
  6. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
  7. Andrew Hanson & Shawn Rohlin, 2011. "The Effect of Location-Based Tax Incentives on Establishment Location and Employment across Industry Sectors," Public Finance Review, , vol. 39(2), pages 195-225, March.
  8. Matias Busso & Patrick Kline, 2008. "Do Local Economic Development Programs Work? Evidence from the Federal Empowerment Zone Program," Cowles Foundation Discussion Papers 1639, Cowles Foundation for Research in Economics, Yale University.
  9. Jed Kolko & David Neumark, 2010. "Do some enterprise zones create jobs?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(1), pages 5-38.
  10. 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.
  11. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
  12. Leslie E. Papke, 1991. "Tax Policy and Urban Development: Evidence From The Indiana Enterprise Zone Program," NBER Working Papers 3945, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa12p776. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.