State Enterprise Zone Programs: Have They Worked?

State Enterprise Zone Programs: Have They Worked?

State Enterprise Zone Programs: Have They Worked?

State Enterprise Zone Programs: Have They Worked?

Synopsis

Peters and Fisher perform very detailed analysis on the effectiveness of the incentives used in enterprise zones and produce rather more discouraging findings on their effectiveness.

Excerpt

We started this project in September 1997, soon after finishing our previous book for the W.E. Upjohn Institute for Employment Research. At that time we were fairly confident that enterprise zones were one of those good ideas that could actually work in practice. Our reasons for this confidence were both theoretical and empirical. Enterprise zone programs seemed to target those in most need of employment and thus were likely to raise fewer economic red flags than other place-based economic-development strategies. Moreover, there was reason to believe that the major incentive instrument used in enterprise zones, tax breaks, could be effective. Indeed, the evidence seemed to support the idea that taxes (and thus tax incentives) could materially alter the geography of business investment. and some of the earlier work that looked directly at enterprise zones indicated that they could be effective in creating local growth.

As will become clearer later, our empirical results have made us much more skeptical of the usefulness of enterprise zones, at least to the extent that zones are primarily a tax incentive program. We find that their effect on growth is close to minimal, they often encourage the use of capital rather than labor, their power to influence business decisions has been diminished by the growth in non-targeted incentives, and they do not alter the wider spatial functioning of urban labor markets. of course, all of this does not prove that state and local enterprise zones cannot work or even that they do not currently work effectively in a few states. But it certainly does suggest that their implementation at the state and local level in the United States has not been a success.

More so than any other research we have done, the work on this book has been information technology intensive. Not only have we been able to use a wide variety of data sets that are huge but nevertheless accessible (compared to the past), but by the end of the project we were astounded at the amount of software we had found it necessary to buy, license or, in quite a few cases, create from scratch. Close to a decade of major improvements in computer programming technology made software development for such a project feasible. At the beginning of the new century it seems needless to add that the Web and . . .

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