Why don't eligible firms claim hiring subsidies? The role of job duration

Research output: Contribution to journalArticle

6 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)916-934
Number of pages19
JournalEconomic Inquiry
Volume49
Issue number3
DOIs
StatePublished - Jul 1 2011
Externally publishedYes

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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