The impact of enterprise zones tax exemption policy in rural regions of Armenia

Abstract

This paper examines the impact of enterprise zones in the rural borderline regions of Armenia, which is aimed to promote the development of the targeted areas, by the provision of special tax exemptions. The findings of extensive and intensive margins conclude that the program has a little impact on the creation of new businesses, as the intensive margin accounts for the major portion of the turnover variation. The difference-in-difference quasi experimental design approach was implemented for testing the hypothesis on an unbalanced panel data, consisting of 2,632 border and 22,153 non-border observations. The method fails to reject the hypothesis that the enterprise zones do not affect the total turnover, meaning that the program has not achieved its intended impact. In addition, the fixed effect regression was implemented for comparing the results and examining the year-specific effects.