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Targeted business incentives and the debt behavior of households

Wenhua Di and Daniel Millimet ()

Empirical Economics, 2017, vol. 52, issue 3, No 10, 1115-1142

Abstract: Abstract The empirical effects of place-based tax incentive schemes designed to aid low-income communities are unclear. While a growing number of studies find beneficial effects on employment, there is little investigation into other behaviors of households affected by such programs. We analyze the impact of the Texas Enterprise Zone Program on household debt and delinquency. Specifically, we utilize detailed information on all household liabilities, delinquencies, and credit scores from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax, a quarterly longitudinal 5% random sample of all individuals in the USA with a social security number and a credit report. We identify the causal effect of the program by using a sharp regression discontinuity approach that exploits the known institutional rules of the program. We find a modest positive impact on the repayment of retail loans, but also evidence of an increase in the delinquency rates of auto loans and in Chapter 13 bankruptcy filings.

Keywords: Enterprise zones; Debt; Consumer finance; Regression discontinuity (search for similar items in EconPapers)
JEL-codes: C21 G02 H25 H31 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s00181-016-1188-z

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