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Applying for entitlements: Employers and the targeted jobs tax credit

  • John H. Bishop

    (Associate Professor, School of Industrial and Labor Relations, Cornell University)

  • Suk Kang

    (Associate Professor, Tokyo Metropolitan University)

Registered author(s):

    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.

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    File URL: http://hdl.handle.net/10.2307/3325511
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    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

    Volume (Year): 10 (1991)
    Issue (Month): 1 ()
    Pages: 24-45

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    Handle: RePEc:wly:jpamgt:v:10:y:1991:i:1:p:24-45
    Contact details of provider: Web page: http://www3.interscience.wiley.com/journal/34787/home

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    1. Gary Burtless, 1985. "Are targeted wage subsidies harmful? Evidence from a wage voucher experiment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 39(1), pages 105-114, October.
    2. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
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