The efficiency of enterprise zone programs

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The Centre for Market and Public Organisation (CMPO) is a leading research centre, combining expertise in economics, geography and law. Our objective is to study the intersection between the public and private sectors of the economy, and in particular to understand the right way to organise and deliver public services. The Centre aims to develop research, contribute to the public debate and inform policy-making. CMPO, now an ESRC Research Centre was established in 1998 with two large grants from The Leverhulme Trust. In 2004 we were awarded ESRC Research Centre status, and CMPO now combines core funding from both the ESRC and the

Matching and Difference in Difference (DID) are two widespread methods that use pre-treatment outcomes to correct for selection bias. I use a model of earnings dynam-ics and entry into a Job Training Program (JTP) calibrated with realistic parameter values to assess the performances of both estimators. I find that Matching generally underestimates the average causal effect of the program and gets closer to the true effect when conditioning on an increasing number of pre-treatment outcomes. Apply-ing DID symmetrically around the treatment date is consistent when selection bias forms and dissipates at the same pace. When selection bias is not symmetric, Monte Carlo simulations show that Symmetric DID still performs better than Matching, especially in the middle of the life-cycle. These results are consistent with estimates of the bias of Matching and DID from randomly assigned JTPs. Some of the virtues of Symmetric DID extend to programs allocated according to a cutoff eligibility rule.

(ii) development of