COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1638

Do Local Economic Development Programs Work?
Evidence from the Federal Empowerment Zone Program

Matias Busso and Patrick Kline

February 2008

This paper evaluates the impact of Round I of the federal urban Empowerment Zone (EZ) program on neighborhood level labor and housing market outcomes over the period 1994-2000. Using four decades of Census data in conjunction with information on the proposed boundaries of rejected EZs, we find that neighborhoods receiving EZ designation experienced substantial improvements in labor market conditions and moderate increases in rents relative to rejected and future zones. These effects were accompanied by small changes in the demographic composition of the neighborhoods, though evidence from disaggregate Census tabulations suggests that these changes account for little of the observed improvements.

JEL Codes: H2, O1, R58, C21

Keywords: Program evaluation, Local economic development, Empowerment zones