Enterprise Zones

Abstract

Using criteria of efficiency, equity, and efficacy to assess enterprise zones reveals several shortcomings. The success of enterprise zones in revitalizing economically distressed areas depends on whether the causes of market failures are correctly identified, whether zone incentives are sufficient to trigger zone investment, and whether the investment and jobs produced in the zones are sufficient to offset additional service costs and lost tax revenues to participating governments. As presently formulated, however, the administration's enterprise zone proposal (March 1982) is insensitive to context-dependent local investment processes. This failure to strengthen the preconditions of neighborhood investment weakens the impact of zone incentives. The economic restructuring processes attendant to zone development raise concerns about equity and efficacy with regard to the promotion of capital-intensive development, displacement of existing businesses and organizations, assistance to small business enterprises, and articulation and representation of neighborhood interests.