The impact of state enterprise zones on urban manufacturing establishments

Since the early 1980s, the vast majority of states have implemented enterprise zones. This paper analyzes urban zones in six states, examining the factors that states use to choose zone locations and the subsequent effect of the zones on business activity and employment. The source of outcome data is the U.S. Bureau of Census' longitudinal research database (LRD), which tracks manufacturing establishments over time. Matched sample and geographic comparison groups are created to measure the impact of zone policy on employment, establishment, shipment, payroll, and capital spending outcomes. Consistent with previous findings, the difference-in-difference estimates indicate that zones have little effect, on average. However, by exploiting the establishment-level data to examine gross as well as net changes, the analysis finds that zones have a positive effect on the outcomes of new establishments and a negative effect on the outcomes of previously existing establishments. © 2004 by the Association for Public Policy Analysis and Management.