Estimating Military Personnel Retention Rates

Theory and Statistical Method

by Glenn A. Gotz, John McCall

Download eBook for Free

FormatFile SizeNotes
PDF file 1.7 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.

A Dynamic Econometric Retention Model (DERM) is designed for studying the effects of alternative compensation policies on the retention behavior of Air Force officers, including the Uniformed Services Retirement Modernization Act, the President’s Commission on Military Compensation, and the Uniformed Services Retirement Benefits Act. DERM is a model of sequential behavior containing the appropriate econometric method for estimating retention rate. The econometric method is a maximum likelihood procedure endogenously determined by the specification of the behavioral model. It differs from earlier approaches in that it explicitly considers behavioral effects flowing from decomposing the disturbance term into permanent and transitory components. An implication of DERM is that retention rates depend both on prospective future returns to remaining in the military and on past occurrences. If this is correct, then simple regression models should overpredict the retention gains of proposed compensation policies, exactly what happens in two recent reenlistment studies using regression analysis.

This report is part of the RAND Corporation Report series. The report was a product of the RAND Corporation from 1948 to 1993 that represented the principal publication documenting and transmitting RAND's major research findings and final research.

This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit www.rand.org/pubs/permissions.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.