What Do We Know About Enterprise Zones?

66 Pages Posted: 3 Jan 2002 Last revised: 15 Aug 2010

See all articles by Leslie E. Papke

Leslie E. Papke

Michigan State University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 1993

Abstract

In the last decade, most states have targeted certain depressed areas for revitalization by providing a combination of labor and capital tax incentives to firms operating in an "enterprise zone" (EZ). A partial equilibrium model is used to analyze the theoretical effects of various EZ incentives on zone wages and employment. I review empirical evidence on the operational success of EZ programs in Britain and the U.S., and present new evidence from the 1990 Census on the success of the Indiana program. Most British zone businesses are relocations, with an annual cost per job of approximately $15,000. U.S. surveys find that much zone activity comes from expansions of existing businesses, with the average cost per zone job ranging from $4,564 to $13,000 annually (about $31,113 per zone resident job). How do zones perform relative to what would have been their performance in the absence of zone designation? Evidence on this issue is summarized for the state of Indiana, where the zone program appears to have increased inventory investment and reduced unemployment claims. But new evidence based on the 1990 Census of Population indicates that the economic well-being of zone residents in Indiana has not appreciably improved.

Suggested Citation

Papke, Leslie E., What Do We Know About Enterprise Zones? (January 1993). NBER Working Paper No. w4251. Available at SSRN: https://ssrn.com/abstract=275419

Leslie E. Papke (Contact Author)

Michigan State University - Department of Economics ( email )

East Lansing, MI 48824
United States
517-355-3773 (Phone)
517-432-1068 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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