Empowerment Zones, Neighborhood Change and Owner Occupied Housing

41 Pages Posted: 23 May 2008

See all articles by Douglas J. Krupka

Douglas J. Krupka

Institute for Research on Labor, Employment and the Economy; University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; Institute for the Study of Labor (IZA)

Douglas S. Noonan

SPEA-Indianapolis; Indiana University Public Policy Institute

Abstract

This paper examines the effects of a generous, spatially-targeted economic development policy (the federal Empowerment Zone program) on local neighborhood characteristics and on the neighborhood quality of life, taking into account the interactions amongst the policy, changes in neighborhood demographics and neighborhood housing stock. Urban economic theory posits that housing prices in a small area should increase as quality of life increases, because people will be more willing to pay to live in the area, but these changes in prices and quality of life will also affect the demographics of the population through sorting and the housing stock through reinvestment. Using census block-group-level data, we examine how housing prices respond to the Empowerment Zone policy intervention. Changes in the other dimensions of neighborhood quality (demographics and housing stock characteristics) will also help determine the total, or full effect on housing values of the policy intervention. This paper estimates these direct and indirect effects in a simultaneous equations setting, compares indirect and full effects, and examines the robustness of the effects to alternate estimation strategies. We find strong evidence for substantively large and highly significant direct price effects, while results suggest that the indirect effects are substantively small or even negative.

Keywords: economic development, empowerment zones, porperty values, household mobility, sorting

JEL Classification: R0, R21, R31, R38, R58

Suggested Citation

Krupka, Douglas J. and Noonan, Douglas, Empowerment Zones, Neighborhood Change and Owner Occupied Housing. IZA Working Paper No. 3320, Available at SSRN: https://ssrn.com/abstract=1135896 or http://dx.doi.org/10.2139/ssrn.1135896

Douglas J. Krupka (Contact Author)

Institute for Research on Labor, Employment and the Economy ( email )

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Douglas Noonan

SPEA-Indianapolis ( email )

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