What Do We Know about Enterprise Zones? / Leslie E. Papke.

By:

Papke, Leslie E

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4251.Publication details: Cambridge, Mass. National Bureau of Economic Research 1993.Description: 1 online resource: illustrations (black and white)Subject(s):

H71 - State and Local Taxation, Subsidies, and Revenue

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: In the last decade, most states have targeted certain depressed areas for revitalization by providing a combination of labor and capital tax incentives to firms operating in an "enterprise zone" (EZ). A partial equilibrium model is used to analyze the theoretical effects of various EZ incentives on zone wages and employment. I review empirical evidence on the operational success of EZ programs in Britain and the U.S., and present new evidence from the 1990 Census on the success of the Indiana program. Most British zone businesses are relocations, with an annual cost per job of approximately $15,000. U.S. surveys find that much zone activity comes from expansions of existing businesses, with the average cost per zone job ranging from $4,564 to $13,000 annually (about $31,113 per zone resident job). How do zones perform relative to what would have been their performance in the absence of zone designation? Evidence on this issue is summarized for the state of Indiana, where the zone program appears to have increased inventory investment and reduced unemployment claims. But new evidence based on the 1990 Census of Population indicates that the economic well-being of zone residents in Indiana has not appreciably improved.

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Previous	nber w4248 Stoking the Fires? Co2 Emissions and Economic Growth /	nber w4249 Evaluating the Effects of Incomplete Markets on Risk Sharing and Asset Pricing /	nber w4250 Real Effects of Monetary Shocks in an Economy with Sequential Purchases /	nber w4251 What Do We Know about Enterprise Zones? /	nber w4252 The Lifetime Incidence of State and Local Taxes: Measuring Changes During the 1980s /	nber w4253 Progressivity of Capital Gains Taxation with Optimal Portfolio Selection /	nber w4254 Capital Gains Taxation and Realizations: Evidence from Interstate Comparisons /	Next

January 1993.

In the last decade, most states have targeted certain depressed areas for revitalization by providing a combination of labor and capital tax incentives to firms operating in an "enterprise zone" (EZ). A partial equilibrium model is used to analyze the theoretical effects of various EZ incentives on zone wages and employment. I review empirical evidence on the operational success of EZ programs in Britain and the U.S., and present new evidence from the 1990 Census on the success of the Indiana program. Most British zone businesses are relocations, with an annual cost per job of approximately $15,000. U.S. surveys find that much zone activity comes from expansions of existing businesses, with the average cost per zone job ranging from $4,564 to $13,000 annually (about $31,113 per zone resident job). How do zones perform relative to what would have been their performance in the absence of zone designation? Evidence on this issue is summarized for the state of Indiana, where the zone program appears to have increased inventory investment and reduced unemployment claims. But new evidence based on the 1990 Census of Population indicates that the economic well-being of zone residents in Indiana has not appreciably improved.