Did the Community Renewal Tax Incentives Pirate Businesses From Other Places?

Abstract

An early concern regarding place-based economic developments was that they might encourage business relocation into target neighborhoods at the expense of other places. To address this concern, when the U.S. Congress passed the Empowerment Zone/Enterprise Community (EZ/EC) program, it included an “antipirating” provision prohibiting use of grants for business relocation. Later iterations of the EZs and Renewal Communities (RCs) received tax incentives only. The RC program did not include an antipirating provision. Did businesses relocate? This study compares business moves within 1,000 feet inside a given RC/EZ with moves within 1,000 feet outside the RC/EZ before and after the intervention. Data are from the National Establishment Time Series (NETS) Database for California and Tennessee. Moves into some RC/EZs increased but so did moves out, leading to no statistically significant net change in numbers of firms. There were no obvious differences between RCs and EZs. The article concludes with policy recommendations.