Funded research

Patrick Kline, Department of Economics, University of Michigan; Matias Busso, Department of Economics, University of Michigan

An Evaluation of the Federal Empowerment Zone (EZ) Program

Abstract

The federal Empowerment Zones and Enterprise Communities (EZ/EC) program is a series of spatially targeted subsidies to capital and labor intended to revitalize distressed urban communities. Approximately $12 billion in federal funding has been allocated to this program. This project will evaluate the effects of the EZ program on a variety of economic and social outcomes using data from the 1980, 1990, and 2000 Decennial Censuses along with proprietary application data obtained from the Department of Housing and Urban Development.

We seek to answer two questions: 1) what effects does EZ designation have on places and 2) what effects does it have on residents? Since land is immobile, the first question is easier to answer. We focus on the impacts of EZ designation on housing values, vacancy rates, the age of the housing stock, and the economic and demographic composition of treated neighborhoods, especially the poverty status of residents. The question asks how the original residents of EZ tracts are affected by EZ designation. This requires information on neighborhood turnover in conjunction with statistical models of selection in order to separate changes due to migration from impacts on original residents.

The primary methodological challenge in performing this evaluation is dealing with the non-random assignment of Empowerment Zones. We utilize knowledge of the competitive bidding process for EZ status to identify treatment effects. Three approaches are proposed for making inference: matched comparisons with rejected EZ’s, within city matching, and regression discontinuity. Each approach has strengths and weaknesses which in conjunction will be useful for reaching conclusions about different aspects of the program’s impact. The analysis will build on the existing literature evaluating state level “enterprise zones” which predate the federal program. Links will also made to the economics literatures on taxation and “spatial mismatch.” We hope that these connections to the previous literature will allow us to tell a coherent story about why any effects we might find are plausible and to infer the welfare implications for the various stakeholders involved.

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