Citation

Ridge M, Smith R. Defence economics 1991; 2(4): 283-293.

Copyright

(Copyright © 1991, Informa - Taylor and Francis Group)

DOI

10.1080/10430719108404703

PMID

unavailable

Abstract

As a result of demographic effects over the next 10 years there will be a tightening of the youth labour market. The military in the UK are fully aware of the manpower problem that will arise and have introduced a number of measures to attempt to improve recruitment and retention. In order to project the military wage bill into the 1990s it is important to estimate the elasticity of substitution (σ) between military personnel and other military inputs. The elasticity of substitution is estimated from an interactive supply and demand model for military manpower thus getting around the endogeneity problem experienced in previous estimation work. A value of unity is estimated for σ, implying that over time the share of service personnel costs in total military expenditure remains constant. A wage elasticity is also identified from the estimation process and estimated to be equal to 0.2.