Do Place Based Policies Matter

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1、FRBSFECONOMICLETTER2015-07March2,2015DoPlace-BasedPoliciesMatter?BYDAVIDNEUMARKANDHELENSIMPSONPlace-basedpoliciessuchasenterprisezonesoffereconomicincentivestofirmstocreatejobsineconomicallychallengedareas.Evidenceontheeffectivenessofenterprisezonesismixed.Thereisnoclearindicationthattheysuccess

2、fullycreatejobs.However,positiveeffectsareevidentforotherpolicies,includingdiscretionarysubsidiesthattargetspecificfirms,infrastructurespendingthattargetsspecificareas,andinvestmentinhighereducationanduniversityresearch.Place-basedpoliciesrefertogovernmenteffortstoenhancetheeconomicperformanceof

3、specificareaswithintheirjurisdiction.Mostcommonly,place-basedpoliciestargetunderperformingareas,suchasdeterioratingdowntownbusinessdistrictsintheUnitedStatesordisadvantagedareasinEuropeanUnioncountries.Buttheycanalsobedesignedtoimprovetheeconomicperformanceofareasthatarealreadydoingwell,forexamp

4、lebyencouragingfurtherdevelopmentofanexistingclusterofbusinessesconcentratedinaparticularindustry.Dotheseplace-basedpolicieswork?Thisquestionisdifficulttoanswerbecausefindingsimilarareasthatwerenottargetedforassistancetouseforanappropriatecomparisonisachallenge.Moreover,thelocalemphasisofthesepo

5、liciesimpliesthatwehavetoaccountforthepossibilitythatworkersandbusinessesmaymoveinresponsetopolicyincentives.Thismobilitycanleadtobenefitsgoingtothosewhowerenotoriginallytargeted.Afurtherconcernisthat,evenifaplace-basedpolicybenefitsonearea,itcanreduceeconomicactivityinanotherarea,whichraisesthe

6、questionofwhetherthesepoliciesincreaseoveralleconomicactivity.ThisEconomicLetterdistillssomekeylessonsfromresearchonplace-basedpoliciesdrawnfromanextensivereviewofrecentresearch(NeumarkandSimpson,forthcoming).ComparedwithWilson(2015),wefocusonthemeasuredimpactofspecifictypesofpoliciesatthelocall

7、evelratherthanbroaderconsiderationsregardingthedesignofstateandlocaltaxincentivesforbusinesses.Typesofplace-basedpoliciesThemostprominentplace-basedpolicyintheUnitedStatesisfederalandstateurbanenterprisezones.Forexample,fede