Enterprise Zone Effectiveness In California

Abstract

This case study looks at enterprise zones in California. Like most states, California had established an enterprise zone (EZ) program that offered businesses tax credits to encourage investment in depressed local economies. Yet despite nationwide adoption of enterprise zones, their efficacy as an economic development tool was disputed. In California, critics charged that costs had exploded without generating commensurate job growth and that EZs were a form of corporate welfare for large corporations that were the main recipients of tax credits. Obtaining reliable information about the benefits for local economies was difficult. The case explores this challenge in reporting results of a small study conducted by a local Southern California enterprise zone in the wake of calls by the state to eliminate the EZ program to help close a $25 billion budget deficit. The case also illustrates the role enterprise zones may play in “incentive packages” offered by local governments seeking to attract national and multinational companies.