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Do California’s Enterprise Zones Create Jobs?

Do California’s Enterprise Zones Create Jobs?. Jed Kolko and David Neumark Public Policy Institute of California. On Average, Enterprise Zones Do Not Lead to Job Growth. Employment is no higher in zones, on average, than in comparison areas Program effectiveness varies across zones

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Do California’s Enterprise Zones Create Jobs?

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  1. Do California’s Enterprise Zones Create Jobs? Jed Kolko and David Neumark Public Policy Institute of California

  2. On Average, Enterprise Zones Do Not Lead to Job Growth • Employment is no higher in zones, on average, than in comparison areas • Program effectiveness varies across zones • Some factors could help enterprise zones raise employment • Possible scope for making program more effective

  3. Why Look at Job Growth? • Often stated as one of program’s primary goals • Bulk of program spending goes to hiring credit • Local administrators surveyed said job growth and business activity are main goal • Few mentioned poverty, unemployment, or disadvantaged workers • Job growth is prerequisite for other outcomes like reducing unemployment • Other effects, which we don’t study, are plausible • Business profitability • Property values

  4. What We Did • Mapped all businesses and enterprise zones in California, 1992-2004 • Compared employment growth rates in newly-designated areas with: • Narrow ring around EZ outer boundary • Areas previously or subsequently added to zone • Surveyed local zone administrators about activities • Used regression model to control for zone economic conditions and changes over time

  5. Santa Ana’s Original Zone, Expansion, and Control Ring Santa Ana Enterprise Zone, Initial 1993 Designation (Red), 1994 Expansion (Blue), and 1,000-Foot Control Ring (Green)

  6. No Immediate or Longer-term Effect on Employment Dots = best estimate Bars = confidence intervals Percentage difference in employment Years before/after zone designation (includes control ring)

  7. Three Factors Contribute to Job Growth • Smaller share of jobs in manufacturing • Other local economic development activities matter more? • Program encourages investment in machinery and property more than labor? • Greater self-reported effort on marketing • Less effort on facilitating the earning of tax credits • Perhaps efforts are retroactive and detract from other efforts?

  8. Implications • Costly program, does not meet important goal • Possible scope for making California’s enterprise zones more effective for job growth, especially with: • Additional experimentation • Rigorous evaluation • If other goals matter more, need to demonstrate rigorously and objectively whether program achieves them

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