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Economic Brief
February 2024, No. 24-07
Are Place-Based Policies a Boon for Everyone?
By Santiago Pinto
Despite the widespread implementation of locally targeted "place-based"
interventions, their optimal design and e ectiveness in addressing regional
economic disparities remains open. Proponents argue that they can leverage
powerful agglomeration economies and bene t underserved areas. Critics
highlight potential pitfalls like ine ciency, gentri cation and negative
spillovers. Evaluating their e ectiveness is challenging due to policy
heterogeneity and data limitations, as existing evidence presents a mixed
picture: Some programs seem to contribute to job creation and poverty
reduction, while others exhibit negligible or even detrimental e ects.
Ultimately, a balanced approach is recommended. Place-based policies should
be considered alongside other interventions within a comprehensive strategy
addressing regional disparities.
Consider an economy in which all factors of production can freely move across locations
and regions. In this environment, we would not expect to see systematic economic
disparities across places.1 In the U.S., however, socioeconomic conditions vary greatly
across regions, cities and even neighborhoods. Segregation — measured in many ways,
such as income, educational attainment and race — has been steadily increasing.
Moreover, such di erences tend to persist over time.
T he geographic variation in socioeconomic conditions can be attributed to a wide range of
factors. T hus, examining the underlying factors and constraints that in uence household
and rm decisions regarding where to live and work is crucial.
Limited local access to resources, infrastructure and market opportunities may impose
signi cant economic and nancial barriers on residents. T hese constraints would prevent
them from, among other things, following job opportunities to di erent places. Residents
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in those areas would, therefore, very likely experience higher unemployment rates than
those who are more mobile.
Understanding the nature of the barriers and constraints is essential when formulating
e ective policy interventions aimed at addressing geographic disparities.
Characterizing Local Economic Development Policies and
Incentives
Local economic development policies are economic incentives that include direct nancial
bene ts incentivizing a rm's opening, expansion or retention in certain geographical
areas. T hese policies are designed to selectively o er incentives to individual businesses,
aiming to stimulate investments that would not have taken place otherwise.2
Incentives are varied: Some are intended to encourage hiring new workers, while others
aim to o set the investment costs of new plants and equipment. T he list of incentives
includes job creation tax credits (JCT C), payroll withholding tax rebates, investment tax
credits, property tax abatements/deferrals, research and development (R&D) tax credits,
and subsidized construction costs. Some locations o er speci c incentive bene ts such as
"deal-closing funds," relocation assistance, subsidized worker training, in-state tuition
rates (such as immediate in-state residence to employees and their children) and other adhoc nancing programs (such as discretionary tax incentives and low- or no-interest loans
to the companies).
In many cases, local development policies are zone-based, which means that the bene ts
are targeted to certain geographical areas designated as economic development zones.
Various zone-based programs have been introduced over the years in the U.S., with
enterprise zones (EZ) and opportunity zones (OZ) standing out as the most common
ones:3
EZs have been used by state and federal governments to target resources to areas
typically characterized by high unemployment rates, poverty and other socioeconomic
di culties.
OZs are part of a similar policy created by the 2017 T ax Cuts and Jobs Act.
Other policies — such as large-scale infrastructure investment programs in targeted areas
and community-led economic development initiatives aimed at revitalizing communities —
are also generally classi ed as place-based.4
Community-led development initiatives are often enacted by providing tax incentives to
real estate developers and other businesses. Examples include the IRS's low-income
housing tax credit initiative, o ering tax credits to developers constructing a ordable
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housing, the federal New Markets T ax Credit program, facilitating a ordable capital for
economic developers, and various other initiatives promoting economic development and
redevelopment, such as tax increment nancing.
Why Invest in Speci c Places
What are the underlying reasons for using regionally targeted policies? Several
considerations support their design and implementation.
Some households — particularly those facing economic hardship — are less mobile and
may nd themselves constrained to speci c locations. A 2018 paper provides evidence that
geographic mobility in the U.S. has been falling considerably. Its authors suggest that the
country has evolved into "durable islands of wealth and poverty."5
Furthermore, migration by low-skilled and mid-skilled individuals has become less directed
toward high-income areas. Higher-skilled individuals, however, still move toward higherskill/higher-wage areas, making skilled areas more skilled over time. Convergence of
incomes across states and MSAs has declined as a result.
While low-income workers would still receive signi cant wage gains from migrating to
high-income areas, the costs of moving to these areas have grown. Various factors may
contribute to the high costs associated with mobility:
Local policies that excessively restrict housing supply — particularly in more
productive locations — make housing more expensive and disincentivize household
mobility.
Insurance against local shocks (such as earthquake insurance in high-risk areas) and
credit constraints may be prohibitively expensive.
State-speci c licensing requirements have emerged as an additional impediment to
interstate migration.6
Some areas may experience declining job opportunities, particularly for low-skilled
workers or workers with speci c skills in sectors subject to negative shocks (such as
the manufacturing sector). Persistent unemployment and the lack of participation in
the labor market could reduce human and social capital and, consequently,
reemployment in other sectors and regions.
Poverty tends to be geographically concentrated and imperfectly documented. In this
context, investing in a place with a high concentration of poverty can reduce the costs of
identifying and targeting the poor. Regionally targeted policies may provide in this context
more "bang for your buck."
Regionally targeted policy interventions may also help overcome speci c market
imperfections and correct for externalities that have a geographic dimension. T he latter
include:
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Agglomeration Economies
T he concentration of rms and individuals in speci c geographic locations generate
signi cant economic advantages, which are generally referred to as agglomeration
economies. T his clustering promotes positive local externalities and enhances productivity,
innovation and growth. In the presence of such powerful economic forces, regionally
targeted investments may "jumpstart" the forces underlying agglomeration to the degree
that the bene ts outweigh the costs.
Regional Spillover E ects
Spending in some areas may generate larger responses than in others. Investing in small
cities, for example, may generate positive spillover e ects on other surrounding areas,
including rural communities within commuting distance.
Human Capital Externalities and Knowledge Spillovers
T here is a rationale for place-speci c labor subsidies when knowledge spillovers take place
across individuals with di erent skill levels. Market outcomes may lead to too much
concentration of high-skill workers (and wage inequality) when such external e ects are
not considered.
Network E ects
Social and production networks may amplify the e ects of place-based policies through
network connections, such as when residents help other residents nd jobs. However,
network e ects may also increase mobility costs. For example, when individuals consider
moving to other locations, they may anticipate it will be costly to establish a new social
network.
Pro-Employment Programs
T he 2018 paper "Saving the Heartland: Place-Based Policies in 21st Century America"
advocates for the geographical targeting of a speci c type of policy: pro-employment
programs.7 Its analysis is centered on the spatial heterogeneity of nonemployment rates.
T he authors claim that nonemployment can be reduced more in places where
nonemployment is currently high. But why the focus on employment and not on, for
instance, income?
First, the authors note that nonemployment rates among prime-age (ages 25-54) men
have been increasing at certain locations. T here is a positive relationship between initial
nonemployment rates and the growth rate of nonemployment rates over the period 1980
to 2015.
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Second, several measures of well-being suggest that not working is a far worse outcome
than low-income employment. Joblessness is positively correlated with higher levels of
dissatisfaction (unhappiness), mental health problems, higher suicide rates, opioid use,
disabilities, and physical problems. Moreover, persistent nonemployment may reduce
reemployment and the ability of individuals to move to other places for better employment
prospects.
T hird, the paper nds that the response of employment rates across regions to policy
interventions is not homogeneous. Employment elasticities di er across regions: A shock
to local labor demand has more impact on the nonemployment rate in places where
nonemployment has been historically high. For instance, employment elasticity is 0.05 in
Wyoming (the state with the lowest nonemployment rate in 1980 at 6.5 percent) and 0.26 in
West Virginia (the state with the highest nonemployment rate in 1980 at 16.5 percent).
In light of the previously outlined considerations, the paper suggests that a geographically
targeted pro-employment program would be more e ective than a geographically uniform
one. T he rationale is that $1 spent ghting nonemployment in an area with a high
nonemployment rate will do more to reduce nonemployment than $1 spent ghting
nonemployment in an area with a low nonemployment rate. Accordingly, pro-employment
programs relative to nonemployment bene ts should therefore be higher in West Virginia
than in Wyoming.
Location Decisions
In the presence of externalities, the observed regional allocation of productive resources
may not be optimal. With agglomeration externalities at play, the establishment of a new
rm at a given location may result in external productivity bene ts for existing rms.
A 2010 paper quanti es such agglomeration spillovers by estimating the impact of the
opening of a large manufacturing plant (a "million dollar plant" [MDP]) on the total factor
productivity (T FP) of incumbent plants in the same county.8 T he paper quanti es the e ect
by contrasting incumbent plants in a given county where the new plant chose to be located
(the "winning county") with incumbent plants in the runner-up county ("losing county").
T he paper nds that, ve years after the MDP opening, T FP of incumbent plants in
winning counties is 12 percent higher than T FP of incumbent plants in losing counties. T he
estimated productivity gains are, however, very heterogeneous:
T he average county-level T FP increase is very large in some instances, small in some
other cases and even negative for a nonnegligible number of counties.
T he e ects are larger for incumbent plants that share similar labor and technology
pools with the new plant.
Winning counties show a relative increase in skill-adjusted labor costs, meaning the
impact on rm pro ts is smaller than the direct increase in productivity.
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Considering these results, a place-based policy that subsidizes the location of this type of
rm may enhance e ciency from the locality perspective. However, from an aggregate
perspective, the e ciency gains depend on whether or not the bene ts of attracting a new
plant for the receiving county are the same everywhere. Additionally, the large variability in
spillovers may a ect the decision to o er the incentive and the magnitude of the subsidies.
Since the estimated impact of MDPs is negative 40 percent of the time, risk-averse local
governments may be unwilling to provide tax incentives with such potential outcomes.
A 2020 paper examines another speci c source of externalities that may justify the
implementation of corrective place-speci c taxes or transfers: skill heterogeneity and
spillovers across di erent types of workers.9 According to this work, larger U.S. cities
exhibit higher concentrations of high-skilled workers, potentially contributing to higher
wage inequality relative to the e cient outcome. Enhancing geographic e ciency would
involve increased redistribution to low-wage cities and reduced skill-based sorting
compared to the existing data, ultimately resulting in decreased wage inequality in larger
cities. T he ideal spatial policy — which would enhance e ciency — should aim to promote a
more diverse integration of high-skill and low-skill workers in low-wage cities.
A 2021 paper focuses on the spillover e ects observed among workers engaged in
di erent occupations with varying task requirements.10 Occupations are broadly
categorized into those involving "cognitive" and "nonroutine" tasks (CNR occupations) and
the rest (non-CNR occupations). T he authors note that the geographical distribution of
these occupations is not uniform: CNR occupation workers tend to concentrate in large
cities, while non-CNR occupation workers are typically found in smaller, often declining
cities. T he paper shows large productivity spillovers within CNR occupations but negligible
spillovers among non-CNR workers. Building upon this evidence, the analysis subsequently
assesses the ability of a speci c set of spatially targeted policies to achieve an optimal
allocation of resources across regions.
Economic Development Anchors
Universities, hospitals and other large employers have the potential to contribute
signi cantly to the economic development and stability of a locality and surrounding areas.
Due to their size and stability, these institutions can serve as "anchors" for local
economies.
Empirical evidence suggests that higher education institutions (HEIs) function as "anchor
institutions," generating localized productivity spillovers within their geographical area of
in uence.11 T hese positive externalities are particularly pronounced for industries with
direct technological linkages to university research and that are actively employing
graduates from the HEI. In such instances, the synergistic interaction between academic
knowledge and industry-speci c demands demonstrably enhances regional innovation,
workforce skill development and overall economic growth.
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Most of the evidence, however, is from long-established educational institutions (such as
universities). So, it is unclear if creating new educational institutions would generate the
same e ects or how long it would take to see bene ts from those investments.
Quantifying State and Local Economic Incentives
Quantifying the scale of state and local economic incentives is not straightforward.
Researchers have developed di erent methodologies to assess the dollar amount of the
bene ts.12 A 2017 report estimates that state and local incentives to rms in export-based
industries amounted to approximately $45 billion in 2015.13 In present value terms, this
gure represents an average of 1.42 percent of business value-added and approximately
30 percent of average state and local business taxes. According to the author's data, the
largest incentives — which accounted for about 70 percent of total incentives in 2015 —
were led by JCT C, followed closely by property tax abatements. Incentives to businesses
have more than tripled since 1990, but they have slowed down in more recent years.
Data from a 2020 paper — which uses a di erent methodology and covers only state-level
initiatives — reveals that incentives vary greatly across states. In 2014, per capita spending
on incentives ranged from $5 to $216.14 Michigan, West Virginia, New York, Vermont and
New Hampshire were the top spenders, and incentives were on average about 40 percent
of (average) state corporate income tax revenues. States with higher corporate income tax
rates were also more likely to o er larger incentives. However, even states with no
corporate income tax — such as Nevada, South Dakota, T exas, Washington and Wyoming
— still spent (on average) about $44 per capita on incentives. Prominent bene ciaries of
incentives often included large, pro table rms in the manufacturing, technology and highskilled service sectors.
Evaluation and E ectiveness of Local Economic
Development Policies
Evaluating the e ectiveness of local economic development policies is (as with pretty much
every other policy) a very challenging task. In the context of place-based policies, a few
speci c issues should be taken into consideration.
Causal E ects
Determining the causal e ect of a policy is not trivial. T o address this issue, several studies
rely on clever identi cation strategies, such as taking advantage of the quasi-experimental
nature of the policy design. One commonly used statistical approach is called "regression
discontinuity." T his approach essentially compares the relative performance (along several
dimensions) of two groups of observations (or individuals): a treatment group subject to
the policy and a control group.
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T he analysis focuses on observations that fall into either of the two groups but are similar
in every other dimension and very close to a predetermined threshold. T his threshold
establishes program eligibility and could be geographically determined or de ned by the
policy itself (such as the poverty rate). Multiple papers, for instance, compare employment
growth in areas within an EZ but very close to the boundary (treatment group) to the
growth observed in areas just outside the zone (control group).15
Other work has exploited di erent types of discontinuities. T he analysis of EZs in T exas
performed by a 2013 paper relies on the fact that census tracts are automatically
designated as EZs if the poverty rate is 20 percent or higher.16 T hus, the study compares
the performance of census tracts at each side of the 20 percent cuto .
Enterprise Zone Designations
Related to the previous point, the selection of the targeted areas (in the case of EZs, the
designation of EZ status) may not be completely exogenous. For instance, if an area was
granted EZ status based precisely on its ability to respond to the policy, then the estimates
would be subject to endogeneity bias. T o proxy (or instrument) for zone applicant success,
a 2009 paper evaluating federal EZs, uses the political in uence of the zone's
representative (representation of the area on the House Ways and Means Committee).17
E ects on Neighboring Areas
For a full assessment of the impact of a targeted regional policy, it is necessary to
determine the extent to which the policy a ects neighboring areas ("spillover e ects" of
the policy). In a geographic context, it is relevant to consider the redistribution of
businesses and/or net employment changes across all those areas.
Data Limitations
Data limitations may restrict the ability to perform a careful evaluation of the policy.
T argeted areas often don't align neatly with census tracts, ZIP codes or other standard
geographical boundaries used for collecting data.
Competing Programs
Another issue that complicates the individual evaluation of the policy is that a variety of
di erent programs typically coexist at the local level at a given point in time. For instance,
at some locations, state EZs and empowerment zones (EMZs) overlap. Moreover, some
cities or states concomitantly implement other locally targeted policies (for example,
incentives to develop or redevelop certain neighborhoods or areas). A clean and pure
assessment of each policy becomes very challenging in this setting.
Potential Pitfalls to Consider
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When designing local economic development policies, it is also crucial to recognize that
geographically targeted bene ts may generate unintended e ects.
Negative Spillovers
Spillovers from place-based policies could be negative. Subsidizing one region may divert
resources from other areas and lead to a net loss in aggregate productivity.
Migration Pattern Distortion
By smoothing income di erences across geographic areas, place-based policies can distort
migration patterns, raise housing costs in low-income areas (gentri cation) and potentially
concentrate poverty by inducing the poor to stay in poor places.
Unintended Bene ciaries
A large portion of the gains may go to groups not intended as the primary bene ciaries of
the policies. For instance, instead of locals bene tting, landowners or workers from
neighboring areas may receive the bulk of the bene ts.
Consider a location-speci c policy that increases the relative attractiveness of the targeted
area in a context with no market failures. Assume initially that individuals are perfectly
mobile and that the housing supply is inelastic. T he policy may then result in an in ow of
workers that would increase the demand for housing in the area and, therefore, housing
prices. T hus, landowners (rather than existing residents) would fully capitalize on the
bene ts of the policies. Imperfect mobility may mean that residents may bene t, but it
would then be necessary to assess the bene ts of the policy against the costs to nontargeted areas and the deadweight loss of the tax.
Agglomeration Economies
Understanding how agglomeration economies work more globally and quantifying their
aggregate e ect is not straightforward. T he rationale for place-based policies based on
agglomeration economies is that overall bene ts are larger than overall costs, which is
di cult to quantify. While these economies may drive local economic growth, what happens
elsewhere? Subsidizing agglomeration economies in one region may divert resources from
other areas, leading to a net loss in aggregate productivity. Firms and workers relocating
to one area may reduce agglomeration economies in the areas from which they move.
Competition to Lure Businesses
T he decentralized implementation of place-based policies may trigger wasteful processes
of strategic competition among local jurisdictions to attract businesses.
Bene t Comparison Murkiness
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It is not entirely clear which combination of place-based policies can deliver long-run
bene ts. T he design and implementation of place-based policies vary enormously across
space and the details matter in explaining their e ectiveness.
Empirical Evidence on the E ectiveness of Local
Economic Development Policies
T o what extent do geographically targeted incentives in uence a company's decision to
locate, expand or retain operations in the speci c area providing these advantages? A pair
of papers by T imothy Bartik summarizes existing evidence in this area.18
One paper distinguishes between rms that would have naturally selected to operate in a
speci c area and those where incentives in uenced the decision (that is, the decision that
would not have occurred "but for" the incentive).19 T he work nds that the "but for" cases
range from 2 to 25 percent. In other words, the incentive is decisive in steering a location,
expansion or job retention decision toward that state or local area in only 2 to 25 percent
of the cases.
T he question is whether, under these conditions, the bene ts are greater than the costs.
Ultimately, the answer depends on, among other factors, the job multiplier e ects of the
policy. With multipliers ranging from 1.5 to 6 (as estimated in related literature) and a "but
for" percentage of 12 percent, the bene t-cost ratio would range from 0.4 to 4.
A previously cited report from Bartik also notes that incentive costs can be signi cantly
reduced by restricting refundability and shortening incentive periods.20 Moreover, net
bene ts may increase substantially when tax incentives are replaced with customized
services (such as customized job training).
One of Bartik's papers also highlights the importance of considering not only how the
incentive policies are designed but also how they are nanced.21 T he opportunity costs of
how incentives are paid for — such as what taxes are increased or what spending is cut —
are important. For instance, nancing incentives by cutting back on productive services (K12 education) have substantial negative e ects on local incomes and highly regressive
e ects on income distribution.
A 2021 paper nds that, overall, incentivized establishments experienced lower
employment gains than the control group of non-incentivized establishments.22 T he
outcome, however, di ers by rm size: In terms of job creation, small and medium-size
rms (less than 250 employees) that are incentivized tend to perform better than larger
ones. T he type of policy also matters: In states where incentives are distributed more
evenly between attracting external businesses and fostering the growth and retention of
local businesses, larger incentivized rms demonstrate comparable employment e ects to
their non-incentivized counterparts.
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Evidence on EZs
Several studies have evaluated the performance of EZs implemented in di erent states.23
T he e ectiveness is measured by assessing how designating an area as an EZ a ects
certain socioeconomic variables, both within the EZ and in surrounding areas. Evaluating
state EZ programs as a whole is complex, given that they include di erent combinations of
bene ts that are not directly comparable.
A 2015 handbook chapter summarizes the main ndings of the academic research.24 T he
research has focused on changes in a series of variables, including employment (by skill
level), unemployment, poverty, household income, wages, rents, home values, vacancy
rates, demographic composition and number of establishments or businesses.
In general, the evidence on the e ectiveness of these policies is mixed. For instance, while
EZs in California and Florida do not seem to increase local employment, EZs increase
annual employment growth rates in T exas by 1 to 2 percent, with most of the positive
e ects concentrated in lower-paying jobs. Similar inconclusive evidence is found
concerning the impact of these policies on local poverty and unemployment rates.
In terms of who bene ts from the programs, some studies nd that housing rents do not
increase and there are no changes in local population composition. Other studies nd that
housing price increases, local population composition changes (because of displacement)
and higher-income households (landowners) gain the most.
Some of the work that has also quanti ed the spillover e ects of EZs nds that the local
positive e ects of the program are often o set by negative e ects elsewhere (for example,
due to the relocation of establishments). In other words, the program seems to generate
negative spillover e ects elsewhere, so net bene ts are nil.
A 2013 paper performs a thorough examination of EMZs within a general equilibrium
framework.25 T he paper considers the simultaneous e ects of this kind of intervention on
wages, employment, population migration, housing prices and housing rents. T he authors
conclude that, after considering all these e ects, EMZs tend to have large positive e ects
more than compensating the (overall) cost of the program. However, they suggest that
due to the lack of precision of their estimates, the conclusions would not necessarily hold
for other similar programs.
Several recent papers nd that EZs do not have a signi cant impact on employment in the
targeted areas. For instance, a 2023 paper evaluates the impact of New Jersey's Urban EZs
on local employment.26 T he empirical analysis relies on a synthetic control approach to
address the problem of endogeneity in the designation of EZs. T he paper shows that areas
granted Urban EZ status do not experience signi cant job growth.
Conclusion
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Despite numerous criticisms, place-based policies are the most prevalent interventions
used by governments to address local economic disparities across regions. Unfortunately,
place-based policies are far from being the silver bullet to solve all sources of economic
disparities across regions.
Still, several reasons would justify their use. One of the most frequently used justi cations
is that place-based policies would jumpstart local economies. T he powerful forces of
agglomeration economies would imply that even small interventions could have large and
sustainable local economic e ects over the long run. One word of caution, though: Because
agglomeration economies arise organically, it is hard to say what incentives could attract
new rms to certain locations.
Evaluating the e ectiveness of place-based policies, as with all other policies, is
challenging. One problem in evaluating the e ectiveness of EZs as a whole is that these
policies are very heterogeneous across geography both in terms of their objectives and
implementation.
T he empirical evidence on the e ectiveness of local economic incentives is mixed. Some
policies have helped reduce local poverty and increase employment, while others have
induced some residents to leave the area, increased rents and housing prices, and
generated negative spillover e ects in surrounding locations.
In the Richmond Fed's 2016 annual report, we delved into the policy debate between
advocates of regionally targeted place-based policies and proponents of people-based or
geographically blind policies.27 As we recommended in that report, we advocate for a
balanced approach: Place-based and people-based policies should not be seen as mutually
exclusive.
Santiago Pinto is a senior economist and policy advisor in the Research Department at the
Federal Reserve Bank of Richmond.
1 Local prices — mostly housing prices and wages — would still di er due to compensating
di erentials across space. Locations are heterogeneous in terms of their consumption and
production amenities, and such di erences would be capitalized in the local housing and labor
markets.
2 See the 2017 report "A New Panel Database on Business Incentives for Economic Development
O ered by State and Local Governments in the United States" by Timothy Bartik.
3 The analysis and conclusions apply in general to a broader set of EZ policies — including the
federal Empowerment Zone Program, which involves renewal communities, empowerment zones
and enterprise communities — and state-level programs, which are usually referred to as EZs, OZs
or targeted economic areas (TEAs), depending on the state.
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4 Examples include the Tennessee Valley Authority and the Appalachian Regional Commission.
5 See the 2018 paper "Saving the Heartland: Place-Based Policies in 21st Century America" by
Benjamin Austin, Edward Glaeser and Lawrence Summers.
6 The 2017 paper "Is Occupational Licensing a Barrier to Interstate Migration?" by Janna Johnson
and Morris Kleiner provides evidence that individuals in occupations with state-speci c licensing
requirements have a 36 percent lower rate of interstate migration than comparable workers in
other occupations.
7 See the previously cited 2018 paper "Saving the Heartland."
8 See the 2010 paper "Identifying Agglomeration Spillovers: Evidence From Winners and Losers of
Large Plant Openings" by Michael Greenstone, Richard Hornbeck and Enrico Moretti.
9 See the 2020 paper "Optimal Spatial Policies, Geography and Sorting" by Pablo Fajgelbaum and
Cecile Gaubert.
10 See the 2021 paper "Local Industrial Policy and Sectoral Hubs" by Esteban Rossi-Hansberg,
Pierre-Daniel Sarte and Felipe Schwartzman.
11 See the chapter "Place-Based Policies" by David Neumark and Helen Simpson, found in the
2015 Handbook of Regional and Urban Economics.
12 The three most commonly used methodologies are rules-based, expenditure-based and
narrative-based approaches. See the 2020 paper "Evaluating State and Local Business Incentives"
by Cailin Slattery and Owen Zidar.
13 The previously cited 2017 report "A New Panel Database on Business Incentives for Economic
Development O ered by State and Local Governments in the United States" relies on a simulation
model to forecast the amount of tax incentives a rm would be eligible for in a speci c city based
on the rm's nancial status using data collected on the rules of each tax rate, tax credit and
grant.
14 See the aforementioned paper "Evaluating State and Local Business Incentives."
15 See the 2009 paper "Do Enterprise Zones Work? An Analysis at the Borders" by Stephen Billings
and the 2010 paper "Do Some Enterprise Zones Create Jobs?" by Jed Kolko and David Neumark.
16 See the 2013 paper "Targeted Business Incentives and Local Labor Markets" by Matthew
Freedman.
17 See the 2009 paper "Local Employment, Poverty and Property Value E ects of Geographically
Targeted Tax Incentives: An Instrumental Variables Approach" by Andrew Hanson.
18 See Bartik's 2018 papers "'But For' Percentages for Economic Development Incentives: What
Percentage Estimates Are Plausible Based on the Research Literature?" and "Who Bene ts From
Economic Development Incentives? How Incentive E ects on Local Incomes and the Income
Distribution Vary With Di erent Assumptions About Incentive Policy and the Local Economy."
19 See Bartik's paper "'But For' Percentages for Economic Development Incentives: What
Percentage Estimates Are Plausible Based on the Research Literature?"
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20 Regarding restricting the refundability, businesses can only receive the bene ts if they face a
local tax liability. Regarding reducing the term, restrict incentives would be restricted to the rst
few years, and the ability to carry forward incentives would be eliminated. See the previously cited
report "A New Panel Database on Business Incentives for Economic Development O ered by State
and Local Governments in the United States."
21 See his 2018 paper "Who Bene ts From Economic Development Incentives? How Incentive
E ects on Local Incomes and the Income Distribution Vary With Di erent Assumptions About
Incentive Policy and the Local Economy."
22 See the 2019 paper "Striking a Balance: A National Assessment of Economic Development
Incentives" by Mary Donegan, T. William Lester and Nichola Lowe.
23 OZs have been established too recently to evaluate their e ectiveness.
24 See the previously cited book chapter "Place-Based Policies."
25 See the 2013 paper "Assessing the Incidence and E ciency of a Prominent Place-Based Policy"
by Matias Busso, Jesse Gregory and Patrick Kline.
26 See the 2023 paper "The Impact of New Jersey's Urban Enterprise Zones on Local Employment:
A Synthetic Control Approach" by Adam Scavette.
27 Policies that overlook spatial considerations are often referred to as "people-based policies."
This term, however, can be misleading, since it may wrongly suggest that place-based policies are
not necessarily designed to assist or support people.
To cite this Economic Brief, please use the following format: Pinto, Santiago. (February 2024)
"Are Place-Based Policies a Boon for Everyone?" Federal Reserve Bank of Richmond Economic
Brief, No. 24-07.
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