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Recent empirical evidence (Neumark and Kolko, 2008) finds that the California Enterprise Zone (EZ) program does not increase employment. The result is in stark contrast to other empirical work (Ham, et al, 2009), which examines economic impact beyond simple employment statistics, showing that EZs increase employment and wages, and decrease poverty levels. Subsequently, what economic data should be examined in assessing the effectiveness of an EZ program? This paper provides a framework for understanding the effectiveness of the California Enterprise Zone (EZ) program which encompasses more than simple employment data. Examining the impact on a single firm, EZ labor tax credits should (depending on elasticities) result in both increased employment and capital.
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