This paper compares and contrasts the United States federal Empowerment Zone and
European Union Objective 2 programs that geographically target economic
revitalization incentives. Since 1989, both programs have designated predominately
industrial or urban areas as being distressed and worthy of government incentives in
three separate rounds.
The paper uses a probit econometric model to comparatively
evaluate the characteristics of the areas that were targeted.
The paper finds that while the programs were fashioned for different reasons and thus had different goals, the
programs on both continents initially targeted very distressed areas. However,
consistent with the fears of critics of spatial targeting, subsequent rounds of designation
greatly expanded the programs, and in most cases, lead to less precise targeting.
(*)We gratefully acknowledge financial and research support from the International
Center for Economic Research (ICER), Turin, Italy. We appreciate the superb research
assistance provided by Lia Maglioni and thank Jon Gant and George Tita for data help.
