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Applying for entitlements: Employers and the targeted jobs tax credit
Author(s) -
Bishop John H.,
Kang Suk
Publication year - 1991
Publication title -
journal of policy analysis and management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.898
H-Index - 84
eISSN - 1520-6688
pISSN - 0276-8739
DOI - 10.2307/3325511
Subject(s) - tax credit , business , earned income tax credit , labour economics , economics , public economics
The Targeted Jobs Tax Credit (TJTC) is probably the most outstanding example of a generous entitlement program with a very low participation rate. Only about 10 percent of eligible youth hired are claimed as a tax credit by their employers. The causes of the low participation rates are analyzed by estimating a Poisson model of the number of TJTC‐eligibles hired and certified during 1980, 1981, and 1982. Information costs, both fixed and variable, are found to be key barriers to TJTC participation. The cost‐effectiveness of TJTC is low because of the stigma attached and the very high recruitment costs of hiring additional TJTC‐eligibles. Because employers find it relatively cheap to certify after the fact eligible new employees who would have been hired anyway, this passive mode of participating in TJTC predominates.