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The effects of an employer subsidy on employment outcomes: A study of the work opportunity and welfare-to-work tax credits

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  • Sarah Hamersma

    (University of Florida)

Abstract

Employer subsidies such as the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work Tax Credit (WtW) are designed to encourage employment by partially reimbursing employers for wages paid to certain welfare recipients and other disadvantaged workers. In this paper, I examine the effects of these subsidies on employment, wages, and job tenure using unique administrative data from Wisconsin. My ability to precisely identify the subsidy-certified workers allows me to distinguish the effects of program participation from mere eligibility. Using propensity score matching estimation, I find some evidence of short-term improvements in labor market outcomes, but little evidence of sustained benefits. © 2008 by the Association for Public Policy Analysis and Management.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

Volume (Year): 27 (2008)
Issue (Month): 3 ()
Pages: 498-520

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Handle: RePEc:wly:jpamgt:v:27:y:2008:i:3:p:498-520

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Web page: http://www3.interscience.wiley.com/journal/34787/home

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  1. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, Elsevier, vol. 125(1-2), pages 305-353.
  2. Timothy J. Bartik, 2001. "Jobs for the Poor: Can Labor Demand Policies Help?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, W.E. Upjohn Institute for Employment Research, number tjb2001.
  3. Blundell, Richard & Meghir, Costas, 2002. "Active labour market policy vs employment tax credits: lessons from recent UK reforms," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2002:1, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  4. John H. Bishop & Suk Kang, 1991. "Applying for entitlements: Employers and the targeted jobs tax credit," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 10(1), pages 24-45.
  5. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(4), pages 605-54, October.
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Cited by:
  1. Schuenemann, Benjamin & Lechner, Michael & Wunsch, Conny, 2011. "Do Long-term Unemployed Workers Benefit from Targeted Wage Subsidies," Economics Working Paper Series 1126, University of St. Gallen, School of Economics and Political Science.
  2. David Neumark, 2011. "Spurring Job Creation in Response to Severe Recessions: Reconsidering Hiring Credits," NBER Working Papers 16866, National Bureau of Economic Research, Inc.
  3. Sarah Hamersma & Carolyn Heinrich, 2007. "Temporary Help Service Firms' Use of Employer Tax Credits: Implications for Disadvantaged Workers' Labor Market Outcomes," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research 07-135, W.E. Upjohn Institute for Employment Research.
  4. Holzer, Harry J., 2007. "Collateral Costs: The Effects of Incarceration on the Employment and Earnings of Young Workers," IZA Discussion Papers 3118, Institute for the Study of Labor (IZA).
  5. Deuchert, Eva & Kauer, Lukas, 2013. "Hiring subsidies for people with a disability: Helping or hindering? - Evidence from a small scale social field experiment," Economics Working Paper Series 1335, University of St. Gallen, School of Economics and Political Science.
  6. Gunderson, Jill Marie & Hotchkiss, Julie L., 2007. "Job Separation Behavior of WOTC Workers: Results from a Unique Case Study," MPRA Paper 44801, University Library of Munich, Germany.

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