JUE Insight: The Impacts of Opportunity Zones on Zone Residents

Abstract

The Opportunity Zone program, created by the Tax Cuts and Jobs Act in 2017, was designed to encourage investment in distressed communities across the U.S. We examine the early impacts (up to one-and-a-half years after enactment) of the Opportunity Zone program on residents of targeted areas. We leverage restricted-access microdata from the American Community Survey and employ a matching approach to estimate causal reduced-form effects of the program. Our results point to little or no evidence of positive effects of the Opportunity Zone program on the employment, earnings, or poverty of zone residents.

Destruction, Policy, and the Evolving Consequences of Washington, DC’s 1968 Civil Disturbance

“…From New Deal programs of the 1930s, to the "Urban Renewal" of the central areas of US cities in the 1950s and 1960s, the federal government has long striven, with at best mixed success, to redevelop urban areas (Collins and Shester, 2013;Cohen, 2019). In recent years, these policies have been replaced by new levers for addressing vacancy and disinvestment: land banks (Whitaker and Fitzpatrick, 2016), tax increment financing (Greenbaum and Landers, 2014), and various tax incentive zones (Neumark and Kolko, 2010;Freedman et al, 2021). Consistent with our findings, none are heralded as a silver bullet.…”

Where is the opportunity in opportunity zones?

“…Furthermore, real estate markets might not be efficient and, therefore, expectations are not priced immediately (Case & Shiller, 1989). However, it should be noted that other studies of the OZ program on aspects, such as employment and residential property prices, find no to very limited effects either (Arefeva et al., 2020; Freedman et al., 2021; Chen et al., 2022).…”

“…(2020); Freedman et al. (2021) explore secondary economic outcomes and find small to no effects on employment in OZs. However, employment effects might only be measurable over the long‐term, once investments are deployed.…”

The Economics of Internal Migration: Advances and Policy Questions

“…We will note, however, that the creation of Opportunity Zones in 2017 has given researchers new fodder for examining the effects of place-based policies. Recent working papers studying the effects of this policy include Freedman et al (2021), Chen et al (2019), andArefeva et al (2021). 26 Relatedly, Zabek (2019) shows that distortions caused by place-based policies may be small because existing residents of depressed areas have high migration frictions due to local ties, while potential migrants are less likely to move to depressed areas than other areas.…”