Place-Based Federal Procurement and Resident Jobs: Lessons from the Historically Underutilized Business Zone Program

Craig Sylvera

No 26-32, Working Papers from Federal Reserve Bank of Cleveland

Abstract: Unlike tax-based place policies that subsidize employment or investment, procurement-based approaches direct federal purchasing to businesses in distressed areas. I examine the HUBZone program, which targets federal contracts to firms in economically disadvantaged census tracts. I find that receiving an award increases jobs for residents of the census tract by 3.5 percent over five to seven years, with no corresponding increase in jobs within the census tract. Establishment-level analysis reveals no employment gains at recipient firms themselves, suggesting any employment effects occur outside the receiving firm. Housing markets respond positively with increased mortgage origination activity. Examining the variation in the size of awards does not reveal a relationship between award size and jobs gained. The findings demonstrate that procurement set-asides can improve local outcomes in distressed areas, though whether they create new jobs or redistribute existing opportunities remains an open question.

Keywords: place-based policies; procurement contracts; local employment; distressed communities (search for similar items in EconPapers)
JEL-codes: H57 J38 R23 R58 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2026-10-30
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DOI: 10.26509/frbc-wp-202632

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