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In this article, we study the impact of a French enterprise zone program-the 'Zones Franches Urbaines' (ZFUs) policy-on establishment location decisions and on labor market outcomes.Our main identification strategy, which combines spatial and time differencing, shows that conditional on locating in a municipality that hosts a ZFU, the policy has a positive and sizable impact on the probability to locate in the ZFU part rather than in the non-ZFU part of municipalities.However, the impact is highly heterogeneous across zones, industries and firms.We also show that this positive effect is entirely due to within-municipality diversion effects.Regarding labor market outcomes, the policy has a positive effect on employment, especially for low-wage workers.As for wages, the effect is null for low-wage workers, and negative for highwage ones.
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