Enterprise Zones and Individual Welfare: A Case Study of California

Raphael Bostic and Allen C. Prohofsky

No 8609, Working Paper from USC Lusk Center for Real Estate

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

Keywords: Enterprise Zones; Investment; Taxes (search for similar items in EconPapers)
Date: 2003
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Journal Article: Enterprise Zones and Individual Welfare: A Case Study of California* (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:luk:wpaper:8609

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