Do Location‐based Tax Incentives Improve Quality of Life and Quality of Business Environment?

Abstract

We examine how location-based tax incentives affect quality of life and business environment through changes in property values and equilibrium wages. Using the federal Empowerment Zone program, we determine whether offering tax incentives to firms improves the welfare of the citizens and attractiveness to firms. We demonstrate that quality of life methodologies can be applied using small geographically aggregated data, such as census block groups. We find that the tax incentives offered by the program notably enhances the quality of business environment for firms in the area while modestly improving the quality of life for the individuals living in the area. * We would like to thank the Lincoln Land Institute for their generous financial support for this project. 2 The quality of business environment methodology attempts to measure the productivity of local amenities of an area. Although studying area-specific productivity has been an important and growing area of research (i.e.

The effects of location-based tax policies on the distribution of household income: Evidence from the federal Empowerment Zone program

“…Despite some evidence of positive effects in the prior literature using mean estimates (e.g. Busso et al, 2013;Ham et al, 2011;HUD, 2001;Krupka and Noonan, 2009;Reynolds and Rohlin, 2014), we find no evidence that the federal EZ program lifted households out of poverty. First, while the overall density of the very poor did decrease in EZ areas, there was less of a decrease compared to the counterfactual areas.…”

“…However as noted by previous researchers (e.g. Ham et al, 2011;Busso et al, 2013;Reynolds and Rohlin, 2014), while the EC areas all qualified for the EZ program, much of the EC areas were markedly better on a variety of observable characteristics than the EZ areas. Table 1 presents summary statistics for our main outcomes for the EZ and EC areas, as well as the differences in the outcomes between EZ and EC areas.…”

“…Specifically, we compare changes in the distribution in areas that received EZ designation with areas that qualified and applied for the EZ program but were rejected. While this control group has been utilized frequently in the previous literature, there is evidence that the EZ program selected areas with worse observable characteristics (Ham et al, 2011;Busso et al, 2013;Reynolds and Rohlin, 2014). Similar to Busso et al (2013), we account for these differences by reweighting the control group to be more similar to the areas selected for the EZ program.…”

The Texas economic model, miracle or mirage? A spatial hedonic analysis

“…Fiscal policies of state and local governments have been found to be as important as natural amenities in explaining metropolitan area wage and rent differentials Tracy 1989, 1991). Reynolds and Rohlin (2014) used the approach to assess the effect of location-based tax incentives on the quality of life and quality of business environment. Therefore, I argue that differentials in wages and land rents across areas capture previous and current growth advantages generated from localbased policies.…”

Examining macro-level correlates of farm equipment theft : a test of routine activity theory and social disorganization theory.

“…This can be achieved by offering tax breaks to these corporations, or by creating partnerships with local technical colleges that produce graduates with the specific skills desired by them (Green, 2012;Hagedorn & Purnamasari, 2012;Reynolds & Rohlin, 2014). Because rural areas are now in competition with international markets (e.g., Mexico) for manufacturing facilities, steps such as these are necessary to ensure that they are not "left behind" by changing economic structures (Leigh & Blakely, 2013).…”