2003
Abstract:
A now popular economic development tool for states, enterprise zone programs attempt
to increase business investment, employment, and wages in depressed areas by offering labor and
capital subsidies to firms operating in the designated zones. While a number of studies have
examined the effects of EZs on business activity, few have explored how these zones have
influenced individuals. This research examines the benefits to individual workers hired under
California’s EZ program using information from tax returns to document changes in the economic
status of workers directly affected by the designation of enterprise zones in their local areas. The
analysis reveals that EZ program participation has a positive impact on both wages and adjusted
gross income (AGI) of EZ participants. It is not possible, however, to determine from our data if
the income boost from EZ participation is permanent or transitory in nature. The data suggest
that EZ participation may benefit taxpayers with very low initial income more than those with
somewhat higher initial income. We also find that participation in the EZ program increases the
likelihood that an individual will file a tax return. Since this is a case study, we caution that
additional analysis is needed to fully determine the extent to which these results can be
generalized.
