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Article
Teaching New Markets Old Tricks: The Effects of Subsidized Investment on Low-Income Neighborhoods
Journal of Public Economics (2012)
  • Matthew Freedman, Cornell University
Abstract
This paper examines the effects of investment subsidized by the federal government’s New Markets Tax Credit (NMTC) program, which provides tax incentives to encourage private investment in low-income neighborhoods. I identify the impacts of the program by taking advantage of a discontinuity in the rule determining the eligibility of census tracts for NMTC-subsidized investment. Using this discontinuity as a source of quasi-experimental variation in commercial development across tracts, I find that subsidized investment has modest positive effects on neighborhood conditions in low-income communities. Though spillovers appear to be small and crowd out incomplete, the results suggest that some of the observed impacts on neighborhoods are attributable to changes in the composition of residents as opposed to improvements in the welfare of existing residents.

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Keywords
  • Place-based programs,
  • business incentives,
  • tax credit,
  • regression discontinuity
Publication Date
December, 2012
Citation Information
Matthew Freedman. "Teaching New Markets Old Tricks: The Effects of Subsidized Investment on Low-Income Neighborhoods" Journal of Public Economics Vol. 96 Iss. 11-12 (2012)
Available at: http://works.bepress.com/matthew_freedman/13/