Combat Risk and Pay: Theory and Some Evidence
INSTITUTE FOR DEFENSE ANALYSES ALEXANDRIA VA
Pagination or Media Count:
Because U.S. military personnel currently receive 225 Hostile Fire PayImminent Danger Pay HFPIDP per month for serving in a combat zone, independent of the level of combat risk, servicemembers who face low levels of risk may be overcompensated. However, because overall compensation must be sufficient to attract volunteers who undertake high levels of risk, it is appropriate to examine the relationship between combat risk and total cash compensation. Using data on enlisted personnel for the period 2003-2009, we estimated that an increase in risk of death of one per thousand personnel was associated with an additional 551 per person in annual compensation. Quadratic estimates reveal that compensation increases in combat risk at a decreasing rate, even when the model is estimated separately for individuals who should have similar preferences toward combat risk. However, when the relationship between compensation and risk was estimated using data only on combat zone observations, the relationship was smaller, statistically less precise, and often negative.
- Economics and Cost Analysis
- Operations Research
- Military Forces and Organizations