THE SUPPLY PRICE OF COMMITMENT: EVIDENCE FROM THE AIR FORCE ENLISTMENT BONUS PROGRAM |
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Authors: | Nicholas Owen |
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Affiliation: | Industry Analysis Branch, Chemicals and Biotechnology Division, Department of Trade and Industry , 151 Buckingham Palace Road, London, SW1W 9SS |
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Abstract: | In fiscal year 1999, the US Air Force introduced a bonus program designed to encourage longer enlistment terms. This regime shift provides a unique opportunity to estimate the elasticity of labor supply at a new margin: the length of the employment contract. A $5000 bonus differential is estimated to increase the probability that a recruit will choose a 6‐year enlistment over a 4‐year enlistment by 30 percentage points. The program is found to be cost‐effective relative to other policies to increase man‐years. |
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Keywords: | Manpower efficiency international comparisons benchmarking resource allocation public choice |
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