Doctoral Dissertation Research: Geographically Targeted Economic Development Incentives and Business Outcomes: Evidence from the Enterprise Zone Programs

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In response to deteriorating conditions in many U.S. urban areas, a common state and local policy initiative has been the provision of tax and other business incentives aimed at attracting or retaining businesses in these distressed areas. Over recent decades, a large variety of autonomous, geographically targeted initiatives, commonly referred to as enterprise zones, have emerged. The enterprise zones of different states vary considerably over a number of important dimensions: the type and the monetary generosity of the incentives offered to zone businesses, the criteria for selecting the targeted areas designated as enterprise zones, and the business eligibility rules to receive the enterprise zone incentives. In principle, the recent experience of different states can be thought of as a natural experiment from which valuable lessons can be learned to refine future local economic development tools. This doctoral dissertation research project will be a comparative empirical study of the impact of state enterprise zone policies on the location and production decisions of private firms. The analysis will combine information on the location and incentive mix of state-sponsored enterprise zones with panel data on economic outcomes. The outcomes data include both establishment-level data on location, input mixes, employment and wages as well as census tract level aggregates of economic activity for the entire nation. Regression analysis will be used to compare business outcomes in places with and without zones. Different econometric methods will be used to control for the tendency of states to designate zones in locations with limited economic vitality prior to designation. By examining whether geographically targeted incentives can revitalize communities and stimulate economic growth, this project will contribute to the understanding of the spatial dynamics of local economies. It will also give policy makers a better understanding of which incentives work best, whether some areas are better suited for enterprise zone solutions than others, and whether zone incentives tend to be favored by businesses of a particular industry. As a Doctoral Dissertation Research Improvement award, this award also will provide support to enable a promising student to establish a strong independent research career.