The May issue of Economic Development Quarterly offers research papers addressing the effectiveness of various state and local economic development programs – from state Enterprise Zone programs (not very effective) to incentives on the movie industry (effective in California), and local efforts to limit chain retail stores and protect employment in mom-and-pop stores in high amenity cities ( again, effective). Another paper examines the industrial characteristics of metropolitan statistical areas that are likely to use economic development incentives. In addition, a paper explores the positive impact for displaced workers, especially women, of “overshooting” in selecting training programs for new occupations.
Finally, Frank Calzonetti reviews and critically examines A.N. Link’s 2020 book “Invention, Innovation and U.S. Federal Laboratories.” The latest issue of Economic Development Quarterly (EDQ) is now available online at https://journals.sagepub.com/home/edq.
Heterogeneous Effects of State Enterprise Zone Programs in the Shorter Run and Longer Run
David Neumark and Timothy Young
Neumark and Young take a careful, long-term examination of state Enterprise Zone programs, and find little evidence to suggest that the programs achieve their economic goals of increasing employment and reducing poverty. Their findings agree with many other studies that measured only the short-term impact. The authors examine five possible outcomes: lowering the joblessness rate, poverty, percentage of households with wages or salaries, average wage and salaries, and employment.
Because each state program is different, the authors had to create four broad categories of program benefits. The authors do a great job in explaining their methodology in a step-by-step manner, which I most interested readers will find very useful.
While the paper provides little evidence that state enterprise zones jumpstart economic activity in designated neighborhoods in the long run, the authors still believe that other policies, such as offering job subsidies, building skills for private employment, and local hiring programs, warrant consideration.
Ready for a Close-Up: The Effect of Tax Incentives on File Production in California
In 2009, 44 states had movie picture incentives (MPI). While the number is now down to 33 states, it is still a serious industry target for much of the country, with up to $3 billion in incentives available. Workman uses a unique data set to see if MPI work in attracting movie dollars into California. The California’s Film and Television Tax Credit Program used a lottery system to dole out part of its incentives, setting up the possibility of a true randomized test. He found that while nearly 20% of films would have been produced in the state without a tax incentive, offering the incentive increased the probability of a film being made in the state by 16 percentage points. He estimates that the program has a return on investment of $1.23.
Does Restricting the Entry of Formula Businesses Help Mom-and-pop Stores? The Case of Small American Towns with Unique Community Character
Minjee Kim and Tingyu Zhou
From 1980 to 2016, 31 communities have enacted land-use restrictions that limited the growth of national chain stores to maintain their local independent stores. The primary reason for these efforts was to protect the areas’ small-town unique amenities, charm, and character, which can be vital in maintaining tourism.
Using a difference-in-differences approach, Kim and Zhou examine Formula Business Restrictions (FBR) and find evidence that restricting chain stores has a positive employment impact on locally owned “mom and pop” retail stores, but did not have a significant employment impact on independent service establishments like restaurants and lodging. The authors suggest that independent retailers are helped because national retail chains can use online sales to subsidy in-store prices. Eating, drinking, and lodging establishments employ similar numbers of employees, regardless if they are part of a national chain.
An Examination of the Relationship between Local Tax Incentives and Diversification of the Local Economic Base
Adrienne DiTommaso and Robert T. Greenbaum
The authors examine 46 metro areas over an 11-year period to probe the relationship between the existing economic composition of an area and its use of economic development incentives./p p They find, in general, that the level of an area’s economic diversity is very difficult to move. Diverse economies remain diverse and only a small percentage of non-diverse areas are successful in becoming substantially more diverse. The authors find that economic incentives are offered to industries that are less concentrated in the area regardless of its level of industry diversity. This finding suggests that areas are trying to encourage growth outside of their existing core industries. Finally, using several panel-regression models, the authors find that customized job training subsides are statistically correlated with increase of diversity.
Skill Overshooting in Job Training with the Trade Adjustment Assistance Program
Justin Barnette and Jooyoun Park
Barnette and Park find that displaced workers seeking training assistance through the Trade Adjustment Assistance (TAA) program have better outcomes if they “overshoot” in training for occupations that are, in general, beyond their current skill level. These participants earn higher wages than participants who trained for occupations that matched their current levels of education. On the downside, selecting the higher-skilled occupation increases their length of unemployment than if they trained for a lesser-skilled occupation.
Compared to the control group, overshooters increased their wage replacement rates by 2.0 percentage points ($615) but their probability of reemployment fell by a similar 1.9 percentage points. It is worthy to note that female participants experienced the strongest gains of training for occupations populated with workers with higher education attainment levels.