TAX POLICY AND URBAN DEVELOPMENT:

Do urban enterprise zones stimulate local employment?

Evaluate the impact of enterprise zones on local employment, using yearly data from 22
cities in Indiana, over the period 1980 1988.1 using enterprise.dta.
Some of the cities never had enterprise zones throughout the period. Other cities started
the period without zones, and added them at some point. Here are the details:
City
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

Zone created in 1984

No zone
No zone
No zone
Zone created in 1985
Zone created in 1984
Zone created in 1984
Zone created in 1985
Zone created in 1985
No zone
No zone
No zone
No zone
Zone created in 1985
No zone
No zone
Zone created in 1984
No zone
No zone
Zone created in 1984
Zone created in 1984
No zone

Your dataset includes city and year identifiers, as well as information about
unemployment claims (uclms). This variable reflects claims made at the unemployment
nearest to the enterprise zone; each of these offices served both the zone and the
surrounding city.
Essay Question to be answered: Do urban enterprise zones stimulate local employment?
Include: problem, methods, a results-of-analyses section with accompanying tables,
and then conclusions/ limitations.
Submit: Annotated Do-File, SMCL, and annotated output showing/explaining work
1

Your analyses should include the following:

1. Simple descriptives. As best you can, discuss how cities that created zones differ
from those that didnt. What time trends do you see in the data? Think/discuss
about how youll control for these factors in your analyses. Draw on skills youve
been asked to explicitly showcase in previous assignments.
-What stats will you need to run? Please run them
2. Simple bivariate regression analysis (an all-years pooled cross section, with just
the zone dummy on the right). Use the log of unemployment claims (luclms,
already in your dataset) as your DV for the regressions, to make your findings
more interpretable. What do you find? What is omitted from the analysis (what
kinds of factors? give specific examples). Why might those omissions bias your
estimate?
3. Fixed effects regression analysis, again using luclms as your DV. This time, add
city fixed effects, but not time fixed effects. How has the coefficient on the zone
dummy changed? Why did it change? What is still omitted from the analysis
(what kinds of factors give specific examples.)? Why and in what direction
might those omissions bias your estimate?
4. Fixed effects regression, luclms as your DV, but this time adding time fixed
effects along with the city fixed effects. Do the fe regression both ways to check
yourself (implicit, dummy variable). What happened to the coefficient on the
dummy variable? Take a look at the magnitude of the city fixed effects. What do
you think the city fes are capturing? --- be specific What is still omitted from the
analysis (what kinds of factors give specific examples.)? Why might those
omissions bias your estimate?