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Neighborhood Economic Development Effects of the Earned Income Tax Credit in Los Angeles

Poor Places and Policies for the Working Poor

University of Hawaii at Manoa

This paper explores the effect of the Earned Income Tax Credit (EITC) on poor neighborhoods of Los Angeles during the late 1990s. To date, few analyses have empirically examined the impact of people-based policies on the economies of poor neighborhoods. The paper first documents the magnitude of this individual wage subsidy in Los Angeles as an unrecognized investment in poor neighborhoods on par with place-based policies such as Enterprise Zones. The paper then uses IRS and Economic Census data by ZIP Code to test whether increased EITC income has an effect on the neighborhood retail job base. Findings suggest an independent correlation between EITC investments and retail job gain. The conclusion uses these results to suggest better policy coordination and recommend four productive areas for future research.

Key Words: EITC • economic development • concentrated poverty • economic base • antipoverty policy • working poor • retail employment

Urban Affairs Review, Vol. 42, No. 6, 851-873 (2007)
DOI: 10.1177/1078087407300515


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