Panel Paper: Targeted Business Incentives and Local Labor Markets

Saturday, November 10, 2012 : 2:25 PM
Baltimore Theatre (Radisson Plaza Lord Baltimore Hotel)

*Names in bold indicate Presenter

Matthew Freedman, Cornell University

This paper uses a regression discontinuity design to examine the effects of geographically targeted business incentives on local labor markets and neighborhood conditions. Unlike elsewhere in the U.S., enterprise zone (EZ) designations in Texas are determined in part by a cutoff rule based on census block group poverty rates. Exploiting this discontinuity as a source of quasi-experimental variation in investment and hiring incentives across areas, I find that EZ designation has a positive, but modest effect on resident employment, increasing opportunities mainly in lower-paying industries. Consistent with the program’s incentive structure, business sitings and expansions spurred by the program are more geographically diffuse. Finally, while there is little evidence of substantial changes in neighborhood composition in affected areas, property values rise in EZs, suggesting that some of the benefits are capitalized into local housing markets.

Full Paper: