Why Don't Eligible Firms Claim Hiring Subsidies? The Role of Job Duration

19 Pages Posted: 29 Jun 2011

Date Written: July 2011

Abstract

Only a small fraction of firms that hire disadvantaged workers claim the federal subsidies for which they qualify, namely, the Work Opportunity Tax Credit (WOTC) and Welfare‐to‐Work Tax Credit (WtW). Subsidy benefits depend partially on job duration, with higher subsidy rates above certain job‐duration thresholds. I estimate the relationship between a firm's WOTC/WtW participation and its eligible workers' job durations. Using unique Wisconsin administrative data, I find that workers' subsidy rates (determined by hours worked) have the expected relationship to participation: Firms with a larger fraction of workers exceeding the programs' job‐duration thresholds are more likely to claim the WOTC/WtW. I also find no evidence that firms systematically modify the job duration of their workers to maximize subsidy payments.

Keywords: J3

Suggested Citation

Hamersma, Sarah, Why Don't Eligible Firms Claim Hiring Subsidies? The Role of Job Duration (July 2011). Economic Inquiry, Vol. 49, Issue 3, pp. 916-934, 2011. Available at SSRN: https://ssrn.com/abstract=1874495 or http://dx.doi.org/10.1111/j.1465-7295.2009.00260.x

Sarah Hamersma (Contact Author)

University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

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