Paying to Avoid Recession: Using Reenlistment to Estimate the Cost of Unemployment

Mark Borgschulte and Paco Martorell

American Economic Journal: Applied Economics, 2018, vol. 10, issue 3, 101-27

Abstract: This paper provides revealed-preference estimates of the monetary value to workers of a lower unemployment rate at the time of job separation. By examining the decision between reenlisting and exiting the military, we find that service members would sacrifice 1.5-2 percent in earnings to avoid a 1 percentage point increase in the home-state unemployment rate during job search. Comparing these quantities to realized earnings losses for those who separate suggests that the value of non-work time and other factors (e.g., private and public transfers) offset less than one-third of the earnings losses caused by exiting the military into a weak labor market.

JEL-codes: E24 E32 J31 J45 J64 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/app.20160257
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Citations: View citations in EconPapers (14)

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Working Paper: Paying to Avoid Recession: Using Reenlistment to Estimate the Cost of Unemployment (2016)
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