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The (Displacement) Effects of Spatially Targeted Enterprise Initiatives: Evidence from UK LEGI
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.
Henry Overman is Professor of Economic Geography in the department of Geography and Environment at the London School of Economics. From 2008 to 2013 he directed the Spatial Economics Research Centre. From September 2013 he is director of the new What Works Centre for Local Economic Growth. His current research interests include the causes and consequences of spatial disparities and the impact of urban and regional policy. He has provided policy advice to, amongst others, the European Commission, Department for International Development, Department for Business Innovation and Skills, Department for Communities and Local Government, HS2 and the Department for Transport, HM Treasury, the Manchester Independent Economic Review, and the North East Independent Economic Review.
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