Targeted Business Incentives and Local Labor Markets

Abstract

This paper uses a regression discontinuity design to examine the effects of geographically targeted business incentives on local labor markets. Unlike elsewhere in the United States, enterprise zone (EZ) designations in Texas are determined in part by a cutoff rule based on census block group poverty rates. Exploiting this discontinuity as a source of quasi-experimental variation in investment and hiring incentives across areas, I find that EZ designation has a positive effect on resident employment, increasing opportunities mainly in lower-paying industries. While business sitings spurred by the program are more geographically diffuse, EZ designation is associated with increases in home values.

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