Does Government Play Favorites? Evidence from Opportunity Zones
Journal of Law and Economics (forthcoming, 2023)
Duke Law School Public Law & Legal Theory Series No. 2020-28
67 Pages Posted: 15 Oct 2019 Last revised: 11 Oct 2022
Date Written: September 10, 2022
Abstract
The Opportunity Zone ("OZ") program is one of the most comprehensive programs to promote development in distressed communities. A criticized feature of the program is that state governors designate zones as OZs from many eligible tracts without scrutiny. We find that governors are more likely to select tracts with higher distress levels and tracts on an upward economic trajectory, indicating that governors selected OZs in a systematic way based on objective criteria. However, we also provide evidence that favoritism plays a role in governors' decisions. OZ designation is more likely for tracts in counties that supported the governor in the election, and when executives or firms with an economic interest in the tract donated to the governor's campaign. We further explore whether transparency and accountability measures affected states' decisions. Our analysis suggests that while most measures had no discernible impact, publishing draft selections may mitigate favoritism and promote systematic decision-making.
Keywords: Opportunity Zones, Development, Administrative Discretion, Social Entrepreneurship, Taxation, Subsidies
JEL Classification: O2, H1, O34
Suggested Citation: Suggested Citation