This page offers an overview of why we are interested in area-based initatives as a means of encouraging local economic growth and offers insight on what does and doesn’t work in this policy area.
It summarises some of the evidence we already have on what works when delivering these types of programmes, and offers some thoughts on improving evaluation as well as some case study examples. Throughout the page you’ll find links to further resources including a more detailed discussion of why we look at area-based initiatives, our full evidence review, as well as evaluation resources.
What do we mean by area based initiatives and how can they deliver local economic growth?
Area based initiatives (ABIs) are policy initiatives aimed at improving growth in specific, tightly defined geographic areas. Examples include Enterprise Zones and some interventions made via EU Structural Funds.
ABIs aim to improve local economic growth by incentivising firms to locate in the area, thereby increasing the availability of jobs.
These initiatives are typically targeted at areas that have weak economic performance.
ABIs typically aim to improve growth in the defined area with some combination of:
- tax breaks to firms.
- wage subsidies.
- reduced planning regulation.
- improvements to physical and transport infrastructure.
- improvements to communications infrastructure
What does the evidence on area based initiatives show?
The available evidence on both EU Structural Funds and Enterprise Zones shows that initiatives can have a positive impact on employment
EU support may also have a positive impact on regional GDP per capita and tends to show a bigger impact in more developed regions.
Enterprise Zones may also have a positive impact on unemployment, poverty, wages and the number of businesses.
Some evidence suggests that positive effects for Enterprise Zones may be driven by displacement from nearby areas.
What policymakers need to know when designing area based initiatives
Enterprise Zone policy should take concerns over displacement seriously, particularly when considering the overall effects of the Zone.
Growth in an Enterprise Zone may come at the expense of the nearby areas which would mean less, or even no, overall growth for the local area as a whole.
Despite this displacement Enterprise Zones could have a specific role in helping to concentrate local employment, which in turn may help reduce the cost of infrastructure provision such as broadband and transport.
All this suggests that any area based initiative must clearly define its objectives and evaluate the outcomes in light of those objectives. The impact of incentives on both target and nearby areas, should be considered.
What policymakers and academics need to know when evaluating area based initiatives
Few evaluations of Enterprise Zones demonstrate whether or not such schemes provide good value for money.
Better evaluations should be undertaken to understand the displacement effects of Enterprise Zones.
We also need to improve evaluations to provide a more accurate assessment of the overall effect of schemes and to help us understand which aspects of scheme design can improve cost effectiveness.
To help practitioners evaluate area based initiatives we have pulled out some examples of good practice in this area:
This study examines the impact of the UK’s Local Enterprise Growth Initiative (LEGI), which ran from 2006 to 2011.
This study evaluates the impact of the Regional Selective Assistance (RSA) programme, which provided support to firms in areas with low GDP and high unemployment.
This study evaluates the economic impact of three different area based initiatives in the United States – Enterprise Zones (ENTZ), Empowerment Zones (EMPZ) and Enterprise Communities (ENTC).
You can learn more about how we rank evaluations using the Scientific Maryland Scale.