Since the 1980s, "enterprise zones" have been established in many states as a way to encourage investment in areas needing economic incentives for renewal. These zones vary widely in size, with a median size of about 3 square miles, but some have much larger boundaries.
Studies have shown that the establishment of an enterprise zone can lead to economic growth. The most common incentive used in enterprise zones is tax abatements, and the most common abatement is property taxes for firms either locating or expanding in the enterprise zone district. Tax abatements have been described by local officials as the most effective tool, and they have led to significant growth in enterprise zones across the country. Other common incentive programs are job training and business loans.
It has also been recognized that improving the general quality of life in a community can improve the economic environment in an enterprise zone, sometimes more significantly than even tax abatements. Such measures include improved public schools, housing rehabilitation, and better police protection and crime prevention.
Do enterprise zones bring significant economic growth? The results are mixed. If the incentives are intended to draw in new business, typically the abatements and other incentives a community can give are a relatively small proportion of business costs, and do not have a great impact on the location decision of corporate leaders. A more important consideration is the quality of the area itself, and since enterprise zones are intended for depressed areas, they often have poor infrastructure, poor transportation connections and higher levels of crime, not enticing prospects for most new businesses.
(Information on this page taken from a study by Frank D. Beck, "Do State-Designated Enterprise Zones Work?" Department of Sociology-Anthropology, Illinois State University. Undated.)
| Economic development | Economic development strategies |
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