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Retirement Pay and Officer Retention

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  • Jeffrey S. Smith
  • James E. West

Abstract

We use data from a natural experiment in which retirement benefits were reduced by congressional legislation and later restored to estimate the effect of future retirement benefit eligibility upon the decision of whether to remain in the U.S. military. We find that the generosity of retirement benefits is significantly correlated with the decision to remain in service until members qualify for benefits. The estimated effect of a 20 percent reduction in the generosity of retirement benefits upon the probability of remaining on active duty is equivalent to the effect of a 0.27 percentage point reduction in the unemployment rate, or approximately a 2 percent increase in the GDP growth rate.

Suggested Citation

  • Jeffrey S. Smith & James E. West, 2012. "Retirement Pay and Officer Retention," NBER Working Papers 18502, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18502
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    References listed on IDEAS

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    Cited by:

    1. Glaser, Darrell J. & Rahman, Ahmed S., 2023. "Between the dockyard and the deep blue sea—Retention and personnel economics in the Royal Navy," Labour Economics, Elsevier, vol. 84(C).
    2. Ahmed S. Rahman, 2020. "Officer retention and military spending: the rise of the military‐industrial complex during the Second World War," Economic History Review, Economic History Society, vol. 73(4), pages 1074-1096, November.

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    More about this item

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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