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The Effect of Separation Bonuses on Voluntary Quits: Evidence from the Military's Downsizing

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  • Stephen L. Mehay
  • Paul F. Hogan

Abstract

This paper analyzes the decision of mid‐career personnel to voluntarily leave the U.S. military in response to a financial incentive program. A model of the separation decision is tested using data on Navy and Air Force enlisted personnel who were targeted for the buyout in 1992. Two alternative estimates are provided, one from a fixed effects model and one from a structural, annualized cost of leaving model. Our basic results indicate the financial incentive had a modest effect in inducing additional quits. The impact of the separation bonus, however, was much larger for occupations facing a threat of involuntary layoff.

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  • Stephen L. Mehay & Paul F. Hogan, 1998. "The Effect of Separation Bonuses on Voluntary Quits: Evidence from the Military's Downsizing," Southern Economic Journal, John Wiley & Sons, vol. 65(1), pages 127-139, July.
    • Handle: RePEc:wly:soecon:v:65:y:1998:i:1:p:127-139
    DOI: 10.1002/j.2325-8012.1998.tb00132.x
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    References listed on IDEAS

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