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SERC/Urban and Spatial Programme Discussion Paper
The (Displacement) Effects of Spatially Targeted Enterprise Initiatives: Evidence from UK LEGI
Elias Einiö and Henry G. Overman February 2016
Paper No' SERCDP0191:
Full Paper (pdf)

JEL Classification: R11; H25; J20; O40

Tags: place-based policy; programme evaluation; displacement; employment; industrial policy

We investigate the impacts of a significant area-based intervention (LEGI) that aimed to increase employment and entrepreneurial activity in 30 disadvantaged areas across England. We examine the spatial pattern of effects at a fine spatial scale using panel data for small geographic units and a regression discontinuity design that exploits the programme eligibility rule. The results indicate considerable local displacement effects. Employment increases in treated areas close to the treatment area boundary at the cost of significant employment losses in untreated localities just across the boundary. These differences vanish quickly when moving away from the boundary and do not persist after the programme is abolished. These findings support the view that area-based interventions may have considerable negative displacement effects on untreated parts of the economy. This displacement can substantially reduce (or in this case eliminate) any net benefits.