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Dissertation Defense |
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Candidate: Yuanlei Zhu Degree of: Doctor of Philosophy Committee: Dr. Wei-Chiao Huang, Chair Abstract: This dissertation analyzes whether the Renaissance Zone (RZ) programs in the state of Michigan are effective in helping distressed urban areas. The unique ES202 data permits us to use establishment level data to examine the impact of RZ program on the firms' employment, real wage, and life duration. Based upon the presumption that different firms are sensitive to the tax incentives in different ways, this study examines the impact on all firms, on manufacturing and service firms, on large and small firms, and on new and existing firms. Selection biases on observed and unobserved variables usually arise from compiling data to conduct program evaluation when comparing the business outcomes of zone areas due to RZ program to those of non-zone areas or comparison areas without RZ program. To correct for the observed selection bias and to also test if the findings are robust and consistent with different specification of the control groups, this study chooses two comparison groups, the 2 nd round RZ and propensity score picked group. To remove the possible unobserved selection bias, the study applies three model specifications to the estimation of employment and real wage effect on unbalanced panel data: fixed effect model, random growth rate model, and lagged dependent variable model, and Difference-in-Difference tests to the estimation of duration effect. The study reveals that the Renaissance Zone programs raise employment by around 2.5% in general, around 3% for service firms, around 3.2% for small firms, while there is no significant employment effect on manufacturing and large firms. Contrary to its mostly positive employment effect, the RZ program causes a drop in the real wage by 4.3% for all firms taken together, by 11.4% for manufacturing firms, by 9.5% for service firms, and 6.1% for small firms. The real wage effect is not significant for large firms. It is also found that the employment and real wage effects change over the time period. Finally, I find that RZ programs do not help to lengthen firms' life duration, based upon Cox proportional hazard function estimations and Difference-in-Difference tests. |
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