The Impact of the French Entreprise Zones on Employment, Business Creations and Pre-existing Businesses

Roland Rathelot2, Patrick Sillard3, Pauline Givord 1

41 Zones Franches Urbaines (the French Enterprise Zones) were created on 1st January 2004. Defined on the scale of a neighborhood, their purpose was, via a number of exemptions from tax and social security contributions granted to companies located in these territories, to revitalize neighborhoods characterized by a high concentration of social problems. This paper provides an econometric evaluation of the economic effect of these zones, using others sensitive neighborhoods (ZRUs, Urban Rehabilitation Areas) as controls. We use a propensity score matching method to deal with selection. We merge several administrative firm-level datasets, providing with precise information on location, demography, employment and balance sheets of firms. At the extensive margin, the impact of ZFU classification on business and job creations is significant and positive. However, two thirds of the increase in raw business flows is due to the transfer of economic activities from areas not targeted by the system. At the intensive margin, we observe a small impact on employment of companies which were already located in ZFUs before these were created.

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