Beyond the Short Run: Long-Term Effects and Replication Challenges in the Federal Empowerment Zone Program

Abstract

Place-based policies have become increasingly popular tools for economic development, yet the broader literature finds mixed results, with most interventions producing weak or null effects. A notable exception is Round I of the Federal Empowerment Zone (FEZ) program, which delivered some of the strongest short-run evidence on program effectiveness documented in this literature. Whether these results persist or can be replicated remains unclear.This paper provides the first long-run evaluation of the FEZ program, covering over 25 years across three implementation rounds. The findings show that Round I generated sustained improvements in poverty reduction and wage income, with benefits lasting nearly three decades. In contrast, later rounds, which included reduced or zero grant funding in their incentive packages, produced predominantly null effects in both the short and long run. No heterogeneous long-run effects within Round I are observed across areas with varying pre-policy conditions, suggesting that grant generosity may be an important factor behind the replication failure.

Keywords: place-based policies, Federal Empowerment Zones, cross-round heterogeneity, replication challenge, long-term effects