Michael Porter is correct in his assertion that inner cities do have comparative advantages because of their strategic location, the existence of densely populated areas, the abundance of low-wage workers and business clusters. His free market solutions to encourage business relocation in inner cities are innovative yet flawed. The comparative advantages have been insufficient in attracting business and capital investment, either due to inadequate information about their benefits or externalities that reduce the benefits of relocation. Therefore, we believe it is necessary for government to provide additional incentives and create an environment that is business friendly.

   Our case studies of Empowerment Zones support a combination of government support and free market principles to encourage inner city development. New York and Atlanta are two examples that demonstrate the Empowerment ZonesÕ potential to create sustained economic growth. Tremendous public finance and strong local institutions aided New YorkÕs outstanding progress. AtlantaÕs Empowerment Zone was swept up in the regionÕs awesome economic growth and dramatic housing trends throughout the 1990Õs. Although the increased EZ incentives may have pushed low-income residents out of the community, Atlanta demonstrated that the Empowerment Zone could have been extremely effective in the context of different market forces. Although Chicago was less successful, part of its struggles were due to bureaucratic structures and it showed improvement in its 80% increase of EZ residents by business in the area.