[cover]

State Enterprise Zone Programs

Have They Worked?

Alan H. Peters and Peter S. Fisher
University of Iowa

Introductory chapter | Table of Contents

"This is an important book that local economic development researchers and practitioners must not miss. In addition to the analysis of enterprise zones, the book provides insightful comments on reverse commuting, inner-city distress, and various economic development programs. The technical discussions on evaluation methods and the use of the Standard Statistical Establishment List are also useful guides for researchers." Journal of Planning Literature
The variety of tax incentives offered in state enterprise zones (EZs) are generally viewed to be a cost-effective means of spurring business investment activity and for retaining or creating jobs. While thousands of state-sponsored zones now exist, controversy remains among those studying EZs about what the programs should be asked to achieve, what types of incentives are appropriate to the goals of EZs, and whether or not EZs are more effective at achieving investment and job growth in specific locations than other economic development tools available to state and local officials.

Jumping into the breach of these controversies are two noted professors of urban and regional planning, Alan H. Peters and Peter S. Fisher. In this book, Peters and Fisher evaluate 75 EZs located in 13 states to gain an understanding of the overall effectiveness of state enterprise zones. Faced with a paucity of data on EZs that could be used in standard economic analysis, the authors employ a hypothetical firm model in which they apply various EZ and non-EZ incentives to financial statements created for a set of "typical" firms. Observing the impacts of both types of incentives on firms' financial statements allow Peters and Fisher to predict the firms' resulting behavior. Between these findings and the data accumulated from actual EZs, they are able to offer insights on seven key policy issues:

  1. What sort of business incentives are provided in EZs?
  2. What is the size of these incentives and what is their relative importance compared to other state and local business incentives?
  3. Do EZ incentives encourage business to use more labor than would otherwise be the case? More generally, what sort of investment do the incentives favor?
  4. Do EZs make sound fiscal sense? In other words, are enterprise zone incentives likely to produce revenue gains or losses for state and local governments?
  5. How much business turnover is typical in EZs?
  6. Is there a "causal" relationship between EZ incentives and economic growth in enterprise zones? Do EZs create growth?
  7. Do EZs draw their labor from poorer, more depressed parts of metropolitan areas?
The authors' overall assessment of EZs is, at best, lackluster. They find that, during the 1990s, non-spatially targeted incentives grew in importance relative to EZ incentives, thus lessening the potential impact of EZs; EZ incentives tend to favor capital-intensive over labor-intensive industries and, indeed, appear to be a haphazard industrial policy; EZs usually cause losses to public coffers and have very little impact on new investment; and EZs do little to improve the job prospects of residents of those zones.

This is an important contribution to a field where little solid evidence exists on the success of EZs.

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    • 345 pp. 2002
    $52 cloth ISBN 0-88099-250-6 / ISBN-13 978-0-88099-250-3
    $22 paper ISBN 0-88099-249-2 / ISBN-13 978-0-88099-249-7

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