Does Government Play Favorites? Evidence from Opportunity Zones

Abstract

In 2017, Congress introduced the Opportunity Zone (``OZ'') designation to promote development in distressed communities. A criticized feature of the program is that state governors select zones from many eligible tracts without meaningful scrutiny. We find that while governors are more likely to select tracts with higher distress levels and tracts on an upward economic trajectory, favoritism seems to play an important role in governor 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.

Keywords: Opportunity Zones, Development, Administrative Discretion, Social Entrepreneurship, Taxation, Subsidies

JEL Classification: O2, H1, O34