Empowerment for Whom? The Impact of Community Renewal Tax Incentives on Employment, Establishment Openings and Closures in Urban Neighborhoods

Abstract:     
Some postulate that spatially targeted grants and tax cuts stimulate jobs, establishment openings, and reduce closures in distressed urban neighborhoods. Scholarly literature is mixed and mostly argues that at best these programs have no impact and at worst raise land rents spurring gentrification. The United States designated three rounds of Renewal Communities, Empowerment Zones or Enterprise Communities (RC/EZ/EC) to receive wage credits or grants. While other researchers have estimated the impact of Round I EZ/ECs, this article will contribute by estimating the impact of more recent rounds in Tennessee and California on job and businesses using propensity score matching. Data are presented by RC/EZ for retail, very small, and minority establishments. Jobs increased in target areas compared to control areas during the wage credit period, in particular for businesses with five or fewer employees. In general, establishment closures and openings both fell. Policy recommendations end the article.

Number of Pages in PDF File: 36

Keywords: Community Economic Development, Tax Incentives, Urban Policy, Empowerment Zones, Job Creation

JEL Classification: O18, O21, R12, J68, K39

working papers series