IDEAS home Printed from https://ideas.repec.org/a/bap/journl/170407.html
   My bibliography  Save this article

The Effect of Enterprise Zone-Related Tax Savings on Economic Development: A Generalized Propensity Score Approach

Author

Listed:
  • Anita Yadavalli

    (City Fiscal Policy, National League of Cities, 660 N. Capitol St. NW, Washington, D.C. 20001, U.S.A.)

Abstract

Since their onset in the early 1980s, enterprise zones (EZ) have been utilized for the revitalization of traditional downtown areas or old industrial and manufacturing areas that have undergone a protracted period of decline. Businesses within EZs often receive some combination of labor and/or capital tax incentives. This article examines various measures of economic development during the period 2006 to 2015 for Indiana firms receiving at least one tax incentive. This relationship is examined using a generalized propensity score model in an effort to remove the potential endogeneity between tax savings to each EZ business and economic development. The results suggest that, on average, employment tends to rise more significantly for firms receiving a modest amount in tax incentives than for those receiving above-average amounts. However, this is not the case for capital investment, where firms receiving modest amounts do not invest any differently than firms receiving above-average amounts. Additionally, the results suggest that fewer savings are being translated into higher wages for employees as firms continue to receive tax incentives.

Suggested Citation

  • Anita Yadavalli, 2017. "The Effect of Enterprise Zone-Related Tax Savings on Economic Development: A Generalized Propensity Score Approach," Review of Economics & Finance, Better Advances Press, Canada, vol. 10, pages 83-96, November.
    • Handle: RePEc:bap:journl:170407
    as

    Download full text from publisher

    File URL: http://www.bapress.ca/ref/ref-article/1923-7529-2017-04-83-14.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Zekai He & Michael Romanos, 2016. "Spatial agglomeration and location determinants: Evidence from the US communications equipment manufacturing industry," Urban Studies, Urban Studies Journal Limited, vol. 53(10), pages 2154-2174, August.
    2. Jim F. Couch & Keith E. Atkinson & Lewis H. Smith, 2005. "The Impact of Enterprise Zones on Job Creation in Mississippi," Contemporary Economic Policy, Western Economic Association International, vol. 23(2), pages 255-260, April.
    3. Mercedes Teruel-Carrizosa, 2010. "Gibrat’s law and the learning process," Small Business Economics, Springer, vol. 34(4), pages 355-373, May.
    4. Leslie E. Papke, 1993. "What Do We Know about Enterprise Zones?," NBER Chapters, in: Tax Policy and the Economy, Volume 7, pages 37-72, National Bureau of Economic Research, Inc.
    5. Jed Kolko & David Neumark & Marisol Cuellar Mejia, 2013. "What Do Business Climate Indexes Teach Us About State Policy And Economic Growth?," Journal of Regional Science, Wiley Blackwell, vol. 53(2), pages 220-255, May.
    6. Michela Bia & Alessandra Mattei, 2008. "A Stata package for the estimation of the dose–response function through adjustment for the generalized propensity score," Stata Journal, StataCorp LP, vol. 8(3), pages 354-373, September.
    7. Joel A. Elvery, 2009. "The Impact of Enterprise Zones on Resident Employment," Economic Development Quarterly, , vol. 23(1), pages 44-59, February.
    8. Boarnet, Marlon G. & Bogart, William T., 1996. "Enterprise Zones and Employment: Evidence from New Jersey," Journal of Urban Economics, Elsevier, vol. 40(2), pages 198-215, September.
    9. Ham, John C. & Swenson, Charles & İmrohoroğlu, Ayşe & Song, Heonjae, 2011. "Government programs can improve local labor markets: Evidence from State Enterprise Zones, Federal Empowerment Zones and Federal Enterprise Community," Journal of Public Economics, Elsevier, vol. 95(7), pages 779-797.
    10. Laura A. Reese, 2006. "Not Just Another Determinants Piece: Path Dependency and Local Tax Abatements," Review of Policy Research, Policy Studies Organization, vol. 23(2), pages 491-504, March.
    11. Hanson, Andrew, 2009. "Local employment, poverty, and property value effects of geographically-targeted tax incentives: An instrumental variables approach," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 721-731, November.
    12. 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.
    13. Michela Bia & Alessandra Mattei, 2012. "Assessing the effect of the amount of financial aids to Piedmont firms using the generalized propensity score," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 21(4), pages 485-516, November.
    14. Neumark, David & Kolko, Jed, 2010. "Do enterprise zones create jobs? Evidence from California's enterprise zone program," Journal of Urban Economics, Elsevier, vol. 68(1), pages 1-19, July.
    15. Landers, Jim, 2006. "Why Don't Enterprise Zones Work? Estimates of the Extent that EZ Benefits are Capitalized into Property Values," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 36(1), pages 1-16.
    16. Krupka, Douglas J. & Noonan, Douglas S., 2009. "Empowerment Zones, neighborhood change and owner-occupied housing," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 386-396, July.
    17. Robert Greenbaum & John Engberg, 2000. "An Evaluation Of State Enterprise Zone Policies," Review of Policy Research, Policy Studies Organization, vol. 17(2‐3), pages 29-45, June.
    18. Coulson, N. Edward & Liu, Crocker H. & Villupuram, Sriram V., 2013. "Urban economic base as a catalyst for movements in real estate prices," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 1023-1040.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sumei Zhang, 2015. "Impacts of Enterprise Zone Policy on Industry Growth," Economic Development Quarterly, , vol. 29(4), pages 347-362, November.
    2. Sumei Zhang, 2019. "Rethinking U.S. enterprise zones: The role of research design in program evaluation," Local Economy, London South Bank University, vol. 34(6), pages 545-571, September.
    3. Nidhi Chaudhary & Jonathan Potter, 2019. "Evaluation of the local employment impacts of enterprise zones: A critique," Urban Studies, Urban Studies Journal Limited, vol. 56(10), pages 2112-2159, August.
    4. Reynolds, C. Lockwood & Rohlin, Shawn M., 2015. "The effects of location-based tax policies on the distribution of household income: Evidence from the federal Empowerment Zone program," Journal of Urban Economics, Elsevier, vol. 88(C), pages 1-15.
    5. Krupka, Douglas J. & Noonan, Douglas S., 2009. "Neighborhood Dynamics and the Housing Price Effects of Spatially Targeted Economic Development Policy," IZA Discussion Papers 4308, Institute of Labor Economics (IZA).
    6. Sumei Zhang, 2020. "Do Research Methods Matter in Enterprise Zone Outcome Evaluations?," Economic Development Quarterly, , vol. 34(3), pages 299-309, August.
    7. Gibbons, Stephen & Overman, Henry & Sarvimäki, Matti, 2021. "The local economic impacts of regeneration projects: Evidence from UK's single regeneration budget," Journal of Urban Economics, Elsevier, vol. 122(C).
    8. Krupka, Douglas J. & Noonan, Douglas S., 2009. "Empowerment Zones, neighborhood change and owner-occupied housing," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 386-396, July.
    9. Neumark, David & Simpson, Helen, 2015. "Place-Based Policies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1197-1287, Elsevier.
    10. 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.
    11. Neumark, David & Kolko, Jed, 2010. "Do enterprise zones create jobs? Evidence from California's enterprise zone program," Journal of Urban Economics, Elsevier, vol. 68(1), pages 1-19, July.
    12. Hanson, Andrew & Rohlin, Shawn, 2013. "Do spatially targeted redevelopment programs spillover?," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 86-100.
    13. C. Lockwood Reynolds & Shawn Rohlin, 2014. "Do Location-Based Tax Incentives Improve Quality Of Life And Quality Of Business Environment?," Journal of Regional Science, Wiley Blackwell, vol. 54(1), pages 1-32, January.
    14. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2012. "Do unemployed workers benefit from enterprise zones? The French experience," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 881-892.
    15. Thierry Mayer & Florian Mayneris & Loriane Py, 2017. "The impact of Urban Enterprise Zones on establishment location decisions and labor market outcomes: evidence from France," Journal of Economic Geography, Oxford University Press, vol. 17(4), pages 709-752.
    16. Elias Einiö & Henry G. Overman, 2016. "The (Displacement) Effects of Spatially Targeted Enterprise Initiatives: Evidence from UK LEGI," SERC Discussion Papers 0191, Centre for Economic Performance, LSE.
    17. Miren Lafourcade & Florian Mayneris, 2017. "En Finir avec les ghettos urbains ?," PSE-Ecole d'économie de Paris (Postprint) halshs-01884340, HAL.
    18. repec:spo:wpmain:info:hdl:2441/3l4arseauo82kr3cm0qr8uihmg is not listed on IDEAS
    19. Thierry Mayer & Florian Mayneris & Loriane Py, 2017. "The impact of Urban Enterprise Zones on establishment location decisions and labor market outcomes: evidence from France," Journal of Economic Geography, Oxford University Press, vol. 17(4), pages 709-752.
    20. Thierry MAYER & Florian MAYNERIS & Loriane PY, 2012. "The Impact of Urban Enterprise Zones on Establishments' Location Decisions: Evidence from French ZFUs," LIDAM Discussion Papers IRES 2012019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    21. Givord, Pauline & Rathelot, Roland & Sillard, Patrick, 2013. "Place-based tax exemptions and displacement effects: An evaluation of the Zones Franches Urbaines program," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 151-163.

    More about this item

    Keywords

    Enterprise zones; Economic development; Employment; Wages; Capital investment; Generalized propensity score;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bap:journl:170407. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Carlson (email available below). General contact details of provider: http://www.bapress.ca .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.