Why Are State Policy Makers Still Proponents of Enterprise Zones? What Explains Their Action in the Face of a Preponderance of the Research?

Abstract

The vast majority of states have implemented some version of enterprise zone (EZ) programs, which geographically target economic development efforts to revitalize distressed areas. While EZs have been studied extensively, there is little evidence that they have succeeded. Despite this, the number of programs, the number of EZs designated, and the land area covered by these zones have grown over time. This essay reviews the research on state EZ programs and explores why it has not had a greater influence on policy. One explanation we discuss is that the research has not been made accessible enough to policy makers and their staffs. Another explanation we posit is that political decision making that guides policy on EZ programs is influenced by many actors and sources of information not just the academic research literature. The essay discusses how the establishment or expansion of EZ programs may be encouraged by EZ businesses and landlords engaging in rent seeking behavior. The essay concludes by providing some recommendations regarding how the research community can make its work more relevant for state and local policy makers and how policy makers can become better consumers of evaluative research when implementing and refining programs.Authors' Note: We thank an anonymous reviewer for suggesting the title. We also thank Don Hirasuna, Susan Hansen, and anonymous reviewers for their constructive suggestions.

Dilemmas of Disaster Zones: Tax Incentives and Business Reinvestment in the Gulf Coast after Hurricanes Katrina and Rita

“…The fact that tax exempt private activity bonds were made available across a vast geographical area (e.g., southern Louisiana) reinforced the deterrent to locate in damaged areas and thereby increased the attractiveness of investment in undamaged areas. These points corroborate research of Bondonio and Greenbaum (), Greenbaum and Bondonio (), and Landers () that found that expansion in the size of enterprise zones diluted the benefit of the tax incentives, since “the value of incentives in any given location is reduced when similar incentives are made available in other locations” (Greenbaum and Landers , p. 471). Thus, the huge size of the GO Zone reduced the postdisaster redevelopment utility of GO Zone bonds.…”

“…Evidence regarding the positive impact of spatially targeted tax incentives has been varied and inconclusive, despite over two decades of study by diverse scholars and researchers (Dabney ; Government Accountability Office ; Peters and Fisher ; ). Nevertheless, indications are that spending on incentives has continued to rise along with the increasing specialization and differentiation of tax incentives (Greenbaum and Landers ; Hicks and LaFaive ). Today, spatially targeted tax incentives take many different forms—e.g., regulatory relief, specialized infrastructure expenditures, tax deductions, exemptions, or credits, industrial revenue bonds, enterprise zones, tax‐increment financing (TIF), and abatements for individual firms.…”

Shrinking cities in Australia, Japan, Europe and the USA: From a global process to local policy responses

“…As noted above for Detroit and observed in urban research, the structure of public-private partnership and local community organisations reflects the predominant local power structures and political alignments (Baum, 1999in Gotham, 2001b. With a few exceptions, in declining cities many of these alignments have focused on downtown redevelopment including the revalorisation of inner city areas for their cultural and entertainment potential and their conversion to convention centres, downtown malls, stadia, cultural and arts districts and gentrifying residential enclaves, which benefit developers, property owners, and business elites, but have had little impact on concentrated poverty and unemployment (Dowall, 1996;Gotham, 2001a;Greenbaum & Landers, 2009) (Table 10).…”

An Analysis of the Employment Effects of the Washington High Technology Business and Occupation (B&O) Tax Credit: Technical Report

“…Buss (2001) provides a review. More recent papers that do not find much effect include Byrne (2010); Calcagno and Thompson (2004); Chirinko and Wilson (2010a,b); Dye and Merriman (1999); Elvery (2009); Gabe and Kraybill (2002); Greenbaum and Landers (2009) Neumark and Kolko (2010); Peters and Fisher (2002);and Weber, Bhatta, and Merriman (2003).…”