Do Spatially Targeted Redevelopment Incentives Work? The Answer Depends on How You Ask the Question

Abstract

We compare several common program evaluation techniques in evaluating the Empowerment Zone (EZ) program, a large US urban redevelopment program that consists primarily of tax credits and is run by the federal government. Studying the federal EZ program as a means to examine methodology is advantageous for several reasons. First, the federal program’s application process generated a set of areas that were qualified and applied but that did not receive the program and thus created a comparison group that should not suffer from application bias. Second, the program had preapplication rules for which areas were considered, generating a rules-based group of comparison areas. Third, the program is uniform across areas, so program characteristics are not endogenous to local needs. Last, the geography of recipient boundaries is accounted for by census tract areas, as are comparison areas. We examine outcomes of the program under various models, including standard cross-section, difference-in-differences, triple difference, instrumental variables, and regression discontinuity. We construct comparison groups using several alternatives for each style of model, including trimming by propensity score. Our results generally show wide-ranging estimates of program effectiveness, with both positive and negative point estimates and a range of statistical significance. The most robust result suggests that EZs may have increased the number of firms in targeted areas in the short term, but the longer-term impact is less clear. We conclude that caution should be taken when interpreting the results of any one evaluation method as definitive, and we suggest that the effect of the EZ program on outcomes of interest is uncertain.

Keywords: program evaluation, methodology, economic redevelopment, employment, firm location

JEL Classification: H25, H32, R51