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Assessing the Incidence and Efficiency of a Prominent Place Based Policy

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  • Matias Busso
  • Jesse Gregory
  • Patrick M. Kline

Abstract

This paper empirically assesses the incidence and efficiency of Round I of the federal urban Empowerment Zone (EZ) program using confidential microdata from the Decennial Census and the Longitudinal Business Database. To ground our welfare analysis, we develop a heterogeneous agent general equilibrium model in which the distortions generated by place-based policies depend upon a set of reduced form elasticities which our empirical work centers on estimating. Using rejected and future applicants to the EZ program as controls we find that EZ designation substantially increased employment in zone neighborhoods, particularly for zone residents. The program also generated wage increases for workers from zone neighborhoods worth approximately $320M per year. Based upon estimates of the number of jobs created for zone residents, we find that EZ employment credits generated deadweight costs equal to (at most) seven percent of their flow cost.

Suggested Citation

  • Matias Busso & Jesse Gregory & Patrick M. Kline, 2010. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," NBER Working Papers 16096, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16096
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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