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Enterprise Zones, Firm Attraction and Retention: A Study of the California Enterprise Zone Program

PFM, Vol. 3 No. 3, (2003)

In the following paper the impact on the number of firms is estimated for the
California Enterprise Zone Program from 1987 to 1991, the years of operation for the first
series of enterprise zones in the state. Data for the estimates for the change in the number
of firms derived from the County Business Pattern data of the U.S. Census Bureau. The
relative change in the number of firms is estimated using a Two-Way Fixed Effects Model.
The results indicate that some types of firms in terms of their size as measured by their
number of employees and industry type may indeed have produced some positive
employment effects for those enterprise zones considered in the study. Caution should be
taken however in placing too much weight on the results of the study given the number of
theoretical and empirical issues that can create doubt with respect to the efficacy of
enterprise zone programs in their ability to provide net changes in social welfare for
economic distressed areas.

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