Replacing churches and mason lodges? Tax exemptions and rural development

• We estimate the employment impacts of a tax credit program in rural France.
• The program has no impact on wages and employment, pointing to the lack of labor demand response.
• This can be explained by the program design but does not seem to be due to geographical constraints.
• Comparative analysis suggests providing for-profit firms with stronger incentives to locate in the program zones.

This paper analyzes a tax credit program targeted at rural areas in France, including temporary and permanent wage subsidies on different types of jobs. We find no impact of the program on employment and wages, pointing to the absence of labor demand response. Comparison with a contemporaneous urban scheme suggests ways that the incentives of the rural program could be targeted more effectively.