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WHY DON'T ELIGIBLE FIRMS CLAIM HIRING SUBSIDIES? THE ROLE OF JOB DURATION
Author(s) -
HAMERSMA SARAH
Publication year - 2011
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2009.00260.x
Subject(s) - subsidy , duration (music) , payment , labour economics , welfare , economics , disadvantaged , work (physics) , business , demographic economics , finance , economic growth , market economy , mechanical engineering , art , literature , engineering
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 . ( JEL J3)