Empowerment Zones, neighborhood change and owner-occupied housing

Regional Science and Urban Economics (Impact Factor: 1.01). 07/2009; 39(4):386-396. DOI: 10.1111/j.0042-7092.2007.00700.x
Source: RePEc

ABSTRACT This paper examines the effects of a generous, spatially targeted economic development policy (the federal Empowerment Zone program) on local neighborhood characteristics and on the neighborhood quality of life, taking into account the interactions amongst the policy, changes in neighborhood demographics and neighborhood housing stock. Urban economic theory posits that housing prices in a small area should increase as quality of life increases, because people will be willing to pay more to live in the area, but these changes in prices and quality of life will also affect the demographics of the population through sorting and the housing stock through reinvestment. Using census block-group level data, we examine how housing prices respond to the Empowerment Zone policy intervention. Changes in the other dimensions of neighborhood quality (demographics and housing stock characteristics) will also help determine the total -- or full -- effect on housing values of the policy intervention. This paper estimates these direct and full effects in a simultaneous equations setting, compares direct and indirect effects and examines the robustness of the effects to alternate estimation strategies. We find strong evidence for substantively large and highly significant direct price effects, while results suggest that the indirect effects are substantively small or even negative.

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    ABSTRACT: We examine how location-based tax incentives affect quality of life and business environment through changes in property values and equilibrium wages. Using the federal Empowerment Zone program, we determine whether offering tax incentives to firms improves the welfare of the citizens and attractiveness to firms. We demonstrate that quality of life methodologies can be applied using small geographically aggregated data, such as census block groups. We find that the tax incentives offered by the program notably enhances the quality of business environment for firms in the area while modestly improving the quality of life for the individuals living in the area.
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