Citation

Solnick LM, Henderson DR, Kroeschel JW. Defence economics 1991; 2(2): 123-133.

Copyright

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

DOI

10.1080/10430719108404685

PMID

unavailable

Abstract

Empirical verification of the theory of compensating wage differentials (CWD) has previously relied on hedonic wage models. This study takes a different approach: it uses the quit rate of workers as a proxy for the disutility of a job. If the quit rates differ between employers, holding wages and preferences constant, that is evidence that non-pecuniary differences exist between the employers. The CWD can be calculated from the wage difference that equalizes the quit rates between employers, obtained from estimating quit probability equations for each employer.

This study uses data on Navy and Air Force enlisted personnel in comparable jobs to estimate the CWD the Navy must pay to retain enlistees at the same rate as the Air Force. The data show that Navy reenlistment rates are lower in five of the seven occupations, although the average wage of Navy personnel is higher in every one. Logit estimates show that the Navy would have to pay wage premiums ranging from 4 to 24 percent to achieve the same reenlistment rate as the Air Force for single, white males.