Understanding the Labor Market Impacts of Place-Based Policies: Evidence from the Opportunity Zone Program

Many place-based programs aim to encourage job creation in distressed areas. We study the employment effects of the Opportunity Zone program, which was designed to promote investment into economically disadvantaged communities across the United States. Using a combination of public-use and restricted-access administrative and survey data, we comprehensively examine the labor market impacts of OZs. We find that OZ designation increases job creation among businesses within zones. However, a large share of the newly created jobs in zones is offset by declines in nearby low-income communities. While we detect gains in OZ resident employment over the longer run, the increase comes from jobs with workplaces outside of OZs that, in light of the changing demographic composition of zones, are likely held by new as opposed to existing residents. Overall, our empirical results suggest that OZs have limited benefits for existing residents of targeted areas and are associated mainly with a spatial reallocation of jobs and households. A model combining firm location choice, capital-skill complementarity in production, skill-differentiated residential mobility, and amenities can rationalize the findings and offers insights into how alternatively structured incentives might affect the program’s direct and indirect impacts.