Association for Public Policy Analysis & Management

Poor neonatal health imposes large costs on individuals and society. Despite the fact that low birth weight rates are only 8 percent nationally, nearly half of all neonatal hospital costs are incurred by low birth weight babies (Almond et al. 2010, Russell et al. 2007). Additionally, rates of low birth weight differ greatly by race, with non-Hispanic blacks nearly twice as likely to have a low birth weight baby compared to non-Hispanic whites (Reichman 2005). The costs of low birth weight are not limited to hospital costs: low birth weight is predictive of worse later-life education, labor market, and health outcomes as well (Almond and Currie 2011). Therefore, policies that improve low birth weight rates, especially those that affect mothers who are most likely to have low birth weight babies, are important.
I estimate the health impacts of the Empowerment Zone (EZ) program—a federal program that gave sizeable grants and tax breaks to certain high-poverty census tracts in selected cities. Using differences-in-differences and synthetic control methods I find that the EZ program decreased fertility rates by 10 percent, decreased the prevalence of low birth weight by 8 percent, and increased overall birth weight by 0.8 percent. This increase in infant health was not driven by changes in the composition of births. The EZ program provided $100 million in block grants for infrastructure improvements and business tax credits to businesses both operating in these areas and hiring EZ residents. I compare the Chicago, New York City, and Philadelphia EZs to a control group of areas which applied for, but were not granted the EZ program in the first round. To address concerns about whether control areas from different cities differ on trends of unobservable characteristics, I perform differences-in-differences and synthetic control models using an alternative control group composed of areas in the same city as the EZs. Results of these analyses support the main findings.
This is the first study to document the health effects of the EZ program. Recent research on the later-life impacts of low birth weight suggest that the health impacts of the EZ program, despite not being the focus of the program, may have substantial long-term benefits.