A Long-Term Evaluation of the First Generation of the French Urban Enterprise Zones

This paper provides new empirical assessment evidence on the efficiency of locally-targeted tax incentives in revitalizing distressed areas. We focus on the first generation of the French “Enterprise Zone” intiative, implemented in 1997 in continental France. We use new georeferenced panel data at the firm level over a twelve-year period. The zone designation process suggests two empirical strategies: difference-in-differences regressions with subclassification on the propensity score and regression discontinuity design. Both methods yield similar results. We highlight a strong positive impact of the Entreprise Zone policy on employment and business location during the first years of the policy. However, this favourable assessment has to be moderated because it seems mostly due to firms that are less prone to stimulate either local employment or economic activities. In addition, after some years, the early positive results are reduced as the increase in business locations is partially offset by more frequent business discontinuations.