In 2017, the Tax Cuts and Jobs Act introduced the Opportunity Zone (OZ) program to stimulate investments in low-income tracts across the United States through capital gains tax incentives. The goals of the program are to spur economic growth and job creation nationally, however, there is currently no consensus on the impact of place-based policies like OZs. Existing literature examines the impact of OZs on broad economic growth and real estate with few papers focusing on their impacts on job creation or in urban cities. Given that place-based policies like OZs are based on economic theories of agglomeration economies, OZs have unique effects on urban cities. Addressing this lacuna, this paper examines (1) the impacts of OZs on small businesses—significant sources of job creation in New York City—and (2) the impact of OZs on a high-density city like New York. A difference-in-differences regression analysis of small businesses in designated and in eligible but not designated census tracts is used to identify OZ impacts on key metrics like changes in the number of small businesses and the number of employees per census tract. Ultimately, I find that the OZ program has not had any statistically significant nor economically significant impacts on small business outcomes in New York City due to the profit-driven structure of the policy.
Regina Shen (Sat,) studied this question.