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California Enterprise Zone Program: A Review and Analysis

Presentation By:Chuck Swenson

Professor and Leventhal Research Fellow, Marshall School of Business, USC

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Outline• EZs: The National Landscape

• Swenson (2009) and Ham, Imrohoroglu, and Swenson(2009)

• Kolko and Neumark (2009) vs. Ham et al

• Conclusions

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EZs: The National Landscape• Connecticut had first program in 1983• In 2003, 38 states had EZs• Currently, 43 states have EZs (or EZ type

programs)• By-state benefits vary widely: from modest hiring

credits (AZ, Utah) to comprehensive income, property, and sales/use tax benefits (NY, PA, MN). See my Treatise chapter handout.

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National Landscape (cont’d)

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Swenson (2009)• Hiring credits should:

– Increase employment (decrease unemployment rates)

– Increase wages– Increase capital expenditures– Increase firm after-tax income– Increase business retention

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Ham, Imrohoroglu, and Swenson (2009)• About the authors

• National study (all 43 states with EZs) over 20 years

• Geo-coding of 8000+ EZ census tracts and cohort tracts

• Differences in differences design

• National as well as state specific effects

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Ham et al (cont’d)

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Ham et al (cont’d)• National Results: EZs have statistically

significant– Decrease in unemployment rate (1.6%; Table

2)– Decrease in poverty rate (5.4%; Table 3)– Increase in fraction of households with wage

and salary income (.61%; Table 4)

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Ham et al (cont’d)• CA Results: EZs result in statistically

significant:– Decrease in unemployment rate (2.2%; Table

2)– Decrease in poverty rate (.5%--Table 3;not

significant)– Increase in fraction of households with wage

and salary income (2.0%; Table 4)

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Kolko and Neumark (2009) vs. Ham et al (2009)• Scope:

– Ham et al (national plus specific states; control for national effects)

– Kolko and Neumark (CA only; no control for national effects)

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Kolko vs. Ham (cont’d)• Outcome variables:

– Ham et al: unemployment rates, poverty rates, wage and salary incomes

– Kolko & Neumark: employment levels only

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Kolko vs. Ham (cont’d)• Source data:

– Ham et al: Bureau of Census (available since 1970s)

– Kolko & Neumark: relatively new dataset derived from Standard & Poors surveys sent to businesses->noise in data->high standard errors->lowered power of statistical tests?

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Conclusions• EZs seem to work

• More analysis on business retention, expansion, increased number of firms, capital outlays, etc. would solidify findings