The Impact of Colorado's Enterprise Zones Program on Unemployment Rate, per Capita Income and Poverty Rate for Zone Residents
Lynch, Devon, Indian Journal of Economics and Business
Using GIS techniques to obtain precise boundary definition of enterprise zone areas from non-zone areas this paper examines the impact of Colorado's enterprise zone program on the residents of these areas. The evidence suggests that urban zones increase the unemployment rate of zone residents, while reducing per capita income. Per capita income is also reduced in rural enterprise zones. There is no evidence that the program has any significant effect on poverty rate.
The economic development of certain depressed areas within the U.S. has been a matter of concern for policy makers. Over the years, to address these inefficiencies and improve the economic conditions of these areas, various economic-development policies have been crafted and deployed. One such policy is the Enterprise Zone Program (EZP).
Enterprise Zones (EZs) are economically depressed geographic areas where specific tax preferences are allocated to capital and/or labor in an effort to induce investment and by extension enhance employment opportunities. The EZ concept has been attributed to British politicians and academics who were inspired by the performance of this development concept in some East Asian economies in the 1970s. These economies, it was felt, were vibrant because of the heavy involvement of the private sector relative to that of government (Peters and Fisher; 2002 pp. 24). The British government implemented a ten-year EZP in 1981.
In the U.S., EZPs have been used as an economic development tool, since the early 1980s. To date, according to Peters and Fisher (2002), approximately forty states as well as the District of Columbia have implemented an EZP in one form or another. Beck (2001) identified more than 3,500 individual zones. Similar programs have also been adopted by the Federal government, that is, Empowerment Zones and Enterprise Communities.
By specifically targeting geographically depressed areas, EZPs are designed to improve the economic well-being of the residents, particularly minorities, whom it is felt are excluded from buoyant suburban labor markets. Against this background, this paper makes three contributions. First, it investigates the economic impact of Colorado's EZP on the residents of the EZs. Specifically, the paper analyses the effect of the program on the unemployment rate, per capita income, and the rate of poverty in EZ areas relative to non-zones. Second, it uses Geographic Information Systems (GIS) to provide original-precise identification of EZ boundaries. Third, it distinguishes between the effects of different type of zones, that is, .urban and rural.
II. LITERATURE REVIEW
Previous research suggests varied effect of EZPs on employment. Bromley and Rees (1988) offer descriptive evidence of employment increases. Papke (1994) provides evidence of a reduction in unemployment claims. Thus, indicating positive aggregate employment effects within zones. Busso and Kline (2007) also find positive effects at the aggregate level. O'Keefe (2004) and Billings (2007) report positive employment effects at the establishment level.
In contrast, Bromley and Morgan (1985), Boarnet and Bogart (1996), Dowall (1996), Bondonio and Engberg (2000), Greenbaum and Engberg (2000), Lambert and Coomes (2001), Greenbaum and Engberg (2004), Couch, Atkinson and Smith (2005) and Bondonio and Greenbaum (2007) all report that employment levels are no greater within EZs than without.
Examinations of the impact of EZPs on the employment of zone residents reveal varied results. Elvery (2009) and Hanson (2008) found that zone subsidies aimed specifically at increasing the employment level of zone residents had little or no effect. Peters and Fisher (2002) concluded that the majority of jobs were taken by people living outside the zones.
Greenbaum and Enberg (2000) provide further evidence that EZPs are ineffective in improving the economic well being of zones residents. …