Because it is differentiated from other employers, the U.S. military enjoys some monopsony power. After reviewing existing estimates of the elasticity of labor supplied to the military, we obtain new estimates for the Army and Navy covering the period from 1998-2007. We employ a control function approach to account for the potential endogeneity of enlistment incentives. Our elasticity estimates of 2.4 for the Army and .4 for the Navy suggest that the services have substantial wage-setting ability. However, the Army faces higher supply elasticity since the invasion of Iraq and higher elasticity in states with weak support for obligatory military service.
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Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number
1107.
Find related papers by JEL classification: J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
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