Working Paper: NBER ID: w16096
Authors: 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.
Keywords: Empowerment Zones; Economic Development; Place-Based Policy
JEL Codes: C21; H20; R58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EZ designation (O52) | employment in designated neighborhoods (R23) |
| EZ designation (O52) | wages for zone residents (J31) |
| EZ designation (O52) | deadweight costs from employment credits (J32) |