Retirement Pay and Officer Retention

Jeffrey S. Smith and James West

No 18502, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: H3 H55 (search for similar items in EconPapers)
Date: 2012-11
New Economics Papers: this item is included in nep-age
Note: LS
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Citations: View citations in EconPapers (2)

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