Reservation Wages and Military Reenlistments,

Analyses of the supply of military reenlistments rely on an occupational choice model in which individuals choose between civilian and continued military employment by comparing offers available in the two sectors. The present study develops and illustrates a new empirical approach which is based upon the occupational choice model but does not use data on civilian earnings. Instead, the approach postulates a distribution among individuals of reservations 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. Section I presents the choice model, develops a reservation wage function, and derives a retention estimating equation although the model and its derived technique are also applicable to analyzing enlistment behavior, the empirical example presented concerns retention among single-term enlisted men and, therefore, the model is described by reference to retention behavior. Section II illustrates the technique using data for enlisted men in military occupations specialties. Next, a general description of the characteristics of previous enlistment and retention studies is provided and compared with the present methodology.