Have the US “Empowerment” and “Enterprise” areas benefited from federal intervention?

The first of these programs, the “Empowerment Zones,” was launched in the early 1990s, followed a few years later by the “Enterprise Zones.” We present first an analysis carried out of the Enterprise Zones by US academics. The study showed positive results in the short run, but was equivocal on the potential for long-term benefits.

The conclusion of our welfare analysis is that the Empowerment Zone program appears to have successfully transferred income to a small spatially concentrated labor force. We caution, however, that our study provides only a short-run evaluation of the Empowerment Zone program. Administrative data indicate that participation in the Empowerment Zone tax credit program increased only gradually over time and it took many years for some economic outcomes to respond. The responses of firms, population, and prices may well differ substantially over longer periods of time, if Empowerment Zone subsidies in fact persist over such horizons. If, however, these subsidies eventually lapse as originally intended, an important question will be whether they have lasting effects.11

2This article is based on M. Busso, J. Gregory, and P. Kline, “Assessing the Incidence and Efficiency of a Prominent Place-Based Policy,” American Economic Review 103, No. 2 (2013): 897–947.

Government Accountability Office study of the impact of Empowerment and Enterprise zones:

http://www.gao.gov/new.items/d06727.pdf

This study was even more equivocal on the long-term benefits of this type of intervention, although it recognized some short-term improvements through increased transfers from government to local low-income people, increased educational opportunity, and incentives for business. The study was hampered by inadequate data sharing by government departments, and inability for different departments and agencies to align goals and information requirements.

As mentioned in our previous report, measuring the effect of initiatives such as the EZ/EC program is difficult for a number of reasons, such as data limitations and the difficulty of determining what would have happened in the absence of the program. Given these limitations, the effects of the EZ/EC program remain unclear. In some cases, communities did see decreases in poverty and unemployment and increases in economic growth. However, when we used econometric analyses to separate the effect of the program from other non-program factors we found that the comparison tracts we selected showed changes that were similar to those in the urban EZs. Further, EZ stakeholders and EC survey respondents said that program-related factors had influenced changes in their communities but noted that other unrelated factors had also had an effect. For example, stakeholders who observed a decrease in poverty in their communities believed that this change had resulted in part from EZ/EC activities, but they also noted that the population in their communities had changed, with original EZ/EC residents moving out of the area and individuals with higher incomes moving in. Ultimately, the evaluation techniques we developed were limited by the absence of data on the use of program grants and tax benefits.

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