TAX POLICY AND URBAN-DEVELOPMENT - EVIDENCE FROM THE INDIANA ENTERPRISE ZONE PROGRAM

This paper analyzes the effect of the Indiana enterprise zone (EZ) pro gram on local employment and investment using a panel of local taxing jurisdictions. As in other EZ programs, Indiana's incentives favor cap ital relative to labor, but the target of the capital incentive is unu sual - the stock of inventories. Using various estimation methods, I e stimate that zone designation initially reduces the value of depreciab le personal property by about 13 percent, but also reduces unemploymen t claims in the zone and surrounding community by 19 percent. The valu e of inventories in Indiana zones is 8 percent higher than it would be without the program.