Place-based tax exemptions and displacement effects: An evaluation of the Zones Franches Urbaines program
We propose to evaluate the impact of the French Zones Franches Urbaines on economic activity. This public-funded place-based program, comparable to US enterprise zones, exempts new and existing firms from taxes for a period of at least 5 years. For the purpose of this evaluation, we merged several administrative datasets at the firm level. This allows us to exhaustively observe business creations and stocks, as well as employment and financial outcomes for each firm at a precise geographical level. We focus on the second wave of the program, during which treated territories were selected among a pool of deprived territories according to a known set of covariates. The way treatment was assigned makes the conditional independence assumption credible in our case. Overall, we find significant effects on business creation and on employment while the effect on firms that were located in the treated areas before the program is not significant, regardless of the outcome. Finally, we provide evidence of significant negative spillovers of the program on neighboring areas.