Assessing the Incidence and Efficiency of a Prominent Place-Based Policy
This research paper empirically evaluates the effectiveness of the US federal Empowerment Zone (EZ) program, a place-based policy that targeted economic investment in distressed urban areas. Utilizing confidential microdata, the authors assess the program's impact on employment, wages, and population, using a difference-in-differences approach with rejected EZ applicants as a control group. They find that EZ designation significantly increased employment and wages in targeted neighborhoods without substantial population increases or changes in the cost of living. A spatial equilibrium model is developed to analyze the program's welfare implications and estimate deadweight losses, concluding that the program's efficiency costs were relatively modest, primarily due to the limited spatial mobility of workers. Robustness checks, including placebo tests and citywide shock analysis, support the findings.
