Applying for entitlements: Employers and the targeted jobs tax credit

John H. Bishop and Suk Kang
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John H. Bishop: Associate Professor, School of Industrial and Labor Relations, Cornell University, Postal: Associate Professor, School of Industrial and Labor Relations, Cornell University
Suk Kang: Associate Professor, Tokyo Metropolitan University, Postal: Associate Professor, Tokyo Metropolitan University

Journal of Policy Analysis and Management, 1991, vol. 10, issue 1, 24-45

Abstract: 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.

Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jpamgt:v:10:y:1991:i:1:p:24-45

DOI: 10.2307/3325511

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