Impact identification strategies for evaluating business incentive programs.

Although business incentive programs of different forms have been the bulk of local economic development policies in many industrialized countries for more than the last three decades, evaluating their impact on employment or local economic growth outcomes remains a challenging task due to the persisting lack of randomized experiments and the presence of many confounding factors which affect firms and economic growth outcomes. Moreover, much of the recent advancements in the statistical program evaluation methodology applicable to non-experimental settings do not make any direct reference to the specificities posed by business incentive policies. This paper aims at offering some clear guidance on how to choose the appropriate focus of the evaluation, the policy relevant evaluation parameters and empirical impact identification strategies when applying statistical methods attempting to estimate how much of the different outcomes between treatment and control groups are attributable to the program/s being evaluated. Each methodological option discussed in the paper is linked to the different features of commonly implemented US and EU policies and to whether or not the analysis focuses on outcomes recorded at a firm-level or at the level of the geographic areas in which the assisted firms are located.Impact evaluation, Business Incentives Policies; Comparison-group designs, Identification strategies

Evaluating Decentralized Policies: How to Compare the Performance of Economic Development Programs across Different Regions or States

This paper proposes an empirical method to evaluate decentralized economic development programs with heterogeneous characteristics implemented in different regions or states. The evaluation design developed in the paper is a comparative analysis that operationalizes differences in regional policy features and controls for pre-intervention heterogeneous characteristics of targeted areas. The proposed method is illustrated and tested through the evaluation of the U.S. Enterprise Zone (EZ) programs. The results of the analysis show that the proposed evaluation design is an effective tool for turning the heterogeneity of decentralized economic development programs from a threat to the validity of the analysis into a great opportunity for testing the effectiveness of a variety of region (or state) specific policy implementation features.comparative evaluation, economic development programs, decentralized policies, longitudinal data, propensity score.

Evaluating the Employment Impact of Business Incentive Programs in EU Disadvantaged Areas. A case from Northern Italy

Business incentive programs have been increasingly popular within the EU as regional economic development tools to promote employment growth in areas with severely distressed and/or declining socio-economic conditions. Reliable evidenced on the effective net employment impact of such initiatives are greatly needed to help refining future intervention as, to these days, European policy makers' decisions can mostly be supported only by monitoring and survey analyses. This paper proposes a method of analysis to assess the employment impact of the business incentive initiatives implemented in the EU areas with declining industrial production (EU 'Objective 2' areas). The proposed method is a comparison-group evaluation approach that uses panels of employment data aggregated by geographic areas (similarly to the evaluation approach successfully adopted by recent studies of the US Enterprise Zone Programs). Details of the proposed method of analysis are illustrated through an empirical application: the evaluation of the business incentive program co-funded by the European Regional Development Fund in the 'Objective 2' areas of the Piedmont region (Italy). Results from such application prove the effectiveness and the robustness of the proposed method for impact evaluation analyses with longitudinal data, and highlight how the Piedmont's business incentive program did not significantly affect employment in the 'Objective 2 areas'.

The employment impact of business investment incentives in declining areas: an evaluation of the EU “Objective 2 Area” programs.

Beginning in 1989, the European Union started targeting its Structural Funds business incentives geographically to industrial areas that have been facing above average unemployment and industrial job loss. Although billions of euros have been invested in these Objective 2 areas, very little is known about the effectiveness of these public expenditures. This paper develops an estimation strategy utilizing parametric difference in difference specifications to estimate the impact of business incentives offered in the Objective 2 areas of central and northern Italy between 1995 and 1998. The paper finds the incentives to be most effective in the areas that faced the least pre-intervention employment loss.Urban and regional economic development; impact evaluation; employment policy; Structural Funds

A comparative evaluation of spacially targeted economic revitalization programs in the European Union and the United States.

This paper compares and contrasts the United States federal Empowerment Zone and European Union Objective 2 programs that geographically target economic revitalization incentives. Since 1989, both programs have designated predominately industrial or urban areas as being distressed and worthy of government incentives in three separate rounds. The paper uses a probit econometric model to comparatively evaluate the characteristics of the areas that were targeted. The paper finds that while the programs were fashioned for different reasons and thus had different goals, the programs on both continents initially targeted very distressed areas. However, consistent with the fears of critics of spatial targeting, subsequent rounds of designation greatly expanded the programs, and in most cases, lead to less precise targeting.

La valutazione d'impatto della riforma universitaria 3+2: un'analisi empirica sui dati dell'Ufficio Statistica del MIUR (Evaluating the "3+2" Italian University Reform: Empirical Evidence from the Analysis of College-Level data)

L'obiettivo del presente lavoro e' stimare l'impatto netto della riforma dei cicli e degli ordinamenti didattici universitari ( D.M. 509/99) su tre importanti fattori misurabili attraverso i micro-dati dell'Indagine sull'Istruzione Universitaria dell'Ufficio di statistica del MIUR: il volume delle immatricolazioni, la percentuale di studenti immatricolati che negli anni successivi permangono come iscritti nelle medesime sedi di facolta' e la percentuale di studenti che si laureano in corso. I modelli di analisi sviluppati nel lavoro mirano a separare la parte dei cambiamenti occorsi tra il periodo pre- e post-riforma imputabili all'impatto netto della riforma stessa rispetto ai cambiamenti che si sarebbero comunque prodotti anche in assenza di quest'ultima, per effetto di altri fattori ad essa non ascrivibili. I risultati delle analisi sono robusti rispetto ad una ampia gamma di diverse forme funzionali dei modelli di stima e permettono di quantificare con buona precisione statistica gli effetti della riforma al netto delle principali variazioni prodotte da altri concomitanti fattori di cambiamento. (English Abstract: This paper is aimed at evaluating the net impact of the recent "3+2" (D.M. 509/1999) Italian University reform which shortened to three academic years the length of most of the undergraduate "Laurea" programs and introduced two-year graduate "Laurea" programs open to students holding an undergraduate "Laurea" degree. The evaluation analysis develop in the paper focus on the following outcomes, measured using data from the "Indagine sull'Istruzione Universitaria" by the "Ufficio di statistica" of MIUR: number of student enrolled in the first year of an undergraduate "Laurea" University program; percent of students enrolled in the first year of a "Laurea" program that are still enrolled in the same college in the subsequent academic years; percent of students that earn a "Laurea" degree within the standard number of academic years indicated by the program curriculum. Impact estimates are retrieved using data covering the academic years from 1998/99 to 2003/04, aggregated at the college level. Under plausible impact identification assumptions, results highlight the effects of the reform net of the outcome variations due to factors independent from the reform. A large sensitivity analysis indicates that the significance and magnitude of the impact estimates are robust across a variety of different specifications of the model.)

The Employment Impact of Business Incentive Policies: a Comparative Evaluation of Different Forms of Assistance.

Business incentive policies, over the past decades, have become popular tools to boost local economic development, employment and firm innovation outcomes, both in Italy and in the EU. Despite the increasing importance of these policies, as of today, a small body of empirical evidence is available on their actual employment impact, retrieved against a credible counterfactual estimate. This paper exploits a firm-level data base of unusual richness, formed by merging longitudinal employment and firm demographic information with the firm-level archives of all incentive payments performed by each of the many different (national, regional and EU co-sponsored) business incentive programs assisting firms located in a large Northern Italian region. The analysis developed in the paper yield the employment impacts of the policies under plausible identification assumptions, disentangling the employment impacts of different values of both the economic intensities of the program assistance and different forms of assistance (the latter distinguishing between capital grants and below-market interest rate/revolving loans).

Quantitative methods to evaluate geographically-targeted economic development programs.

In recent years an increasing amount of efforts has been devoted, both in the U.S. and within the E.U., to perform impact evaluation of geographically-targeted economic development (GTED) programs. The surging interest for the evaluation of GTED programs is challenged by the difficulty to assess the causality link between the program intervention and the observed changes in the economic outcomes of interest. Evaluating GTED programs is a difficult task because it requires the evaluator to distinguish changes due to the program from changes due to the many factors independent from the program intervention. Such a task is particularly difficult also due to the lack of experimental data available to the evaluator. This paper illustrates the sources of the potential biases that can affect impact estimates of GTED programs when no experimental data are available, and presents a number of statistical methods that control for such sources. As a conclusion of the paper, a number of criteria are developed to select the most appropriate methodology for the analysis, based on the program characteristics and on the type of data available.impact evaluation, economic development programs, selection bias, omitted variable bias, one group design, comparison group design.

Counterfactual Impact Evaluation of Enterprise Support Policies: An Empirical Application to EU Co-Sponsored, National and Regional Programs

While the importance of enterprise support policies in the EU continues to grow, there remains only limited empirical evidence examining the effects of the policies on socially relevant outcomes such as employment. This paper shows how to exploit firm-level data, formed by merging longitudinal employment and firm demographic information with the firm-level archives of the incentive payments, to offer robust counterfactual impact evaluation evidence on the employment effects of the coexisting European Regional Development Fund (ERDF) co-sponsored, national and regional programs commonly operated in many EU regions. The analysis uses data from a large northern Italian region and yields employment impacts of the policies under plausible identification assumptions, disentangling the impacts of different values of both the economic intensities of the program assistance and different forms of assistance (the latter distinguishing between capital grants and below-market interest rate/revolving loans). The paper finds that the absolute per-firm employment effects of the programs are increasingly larger the higher the economic value of the incentives awarded to the assisted firms. The incentives with the highest per-firm economic value, however, yield employment impacts with a much higher cost per each additional new job than incentives with a lower economic value. The results of the analysis also show that the absolute per-firm employment effects of soft loans are similar to those of capital grants. However, taking into consideration that soft loans bear a much lower cost in terms of public money devoted to the subsidies than capital grants, the impact estimates retrieved from analysis indicates that soft loans possess an higher employment effectiveness than capital grants