Local employment, poverty, and property value effects of geographically-targeted tax incentives: An instrumental variables approach

The federal Empowerment Zone (EZ) program is a set of tax incentives targeted to areas of select cities. I estimate the effect of the EZ program on employment, poverty, and property values by comparing areas that received an EZ to areas that applied (and qualified), but were rejected. Because of endogeneity concerns, I use political representation to instrument for EZ designation. OLS results show a positive and statistically significant effect of the program on employment and poverty. IV estimates suggest the program had no effect on employment and poverty, and instead hid a large statistically significant effect on property values. (C) 2009 Elsevier B.V. All rights reserved.