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

Arbeitspapier

This paper provides revealed-preference estimates of the monetary value of avoiding job search in a high-unemployment labor market by examining the behavior of military servicemembers deciding between reenlisting and exiting the military. We find that servicemembers would sacrifice 1.5-2% in earnings in exchange for avoiding a one percentage point increase in the home-state unemployment rate. Comparing these estimates to realized losses in post-service civilian earnings resulting from exiting the military during times of high unemployment suggests that mitigating factors (e.g., leisure, private and public transfers) offset less than one-third of the earnings losses caused by entering a weak labor market.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 9680

Classification and Topics

• Classification: Wirtschaft ; Wages, Compensation, and Labor Costs: General ; Mobility, Unemployment, Vacancies, and Immigrant Workers: General ; Unemployment Insurance; Severance Pay; Plant Closings
• Subject: welfare cost of business cycles ; labor market entry ; military reenlistment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Borgschulte, Mark ; Martorell, Paco
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/130366
• Last update: 10.03.2025, 11:41 AM CET