Reservation Wages and Military Reenlistments.

by Adele P. Massell

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Develops and illustrates a new empirical approach to analyzing the supply of military reenlistments, based on an occupational choice model, but not using data on civilian earnings. Instead, this study postulates a distribution among individuals of reservation wages (levels of military pay just sufficient to induce reenlistment), and uses data on retention and military pay to impute the parameters of the reservation wage distribution. The occupational choice model is described, a reservation wage function is developed, and a retention estimating equation is derived. The technique is illustrated using data for enlisted men in Air Force electronics specialties. Previous enlistment and retention studies are compared with the present approach. It is argued that the new approach requires fewer restrictive assumptions and is less costly to use. This method of analysis is not complex to compute, and has theoretical as well as empirical advantages, which make it worthy of further testing and evaluation. 31 pp. Ref.

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