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The (Displacement) Effects of Spatially Targeted Enterprise Initiatives: Evidence from UK LEGI

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  • Elias Einiö
  • Henry G. Overman

Abstract

We investigate the impacts of a significant area-based intervention (LEGI) that aimed to increase employment and entrepreneurial activity in 30 disadvantaged areas across England. We examine the spatial pattern of effects at a fine spatial scale using panel data for small geographic units and a regression discontinuity design that exploits the programme eligibility rule. The results indicate considerable local displacement effects. Employment increases in treated areas close to the treatment area boundary at the cost of significant employment losses in untreated localities just across the boundary. These differences vanish quickly when moving away from the boundary and do not persist after the programme is abolished. These findings support the view that area-based interventions may have considerable negative displacement effects on untreated parts of the economy. This displacement can substantially reduce (or in this case eliminate) any net benefits.

Suggested Citation

  • 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.
    • Handle: RePEc:cep:sercdp:0191
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    More about this item

    Keywords

    place-based policy; programme evaluation; displacement; employment; industrial policy;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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