Paying to Avoid Recession: Using Reenlistment to Estimate the Cost of Unemployment
American Economic Journal: Applied Economics
vol. 10,
no. 3, July 2018
(pp. 101-27)
(Complimentary)
Abstract
This paper provides revealed-preference estimates of the monetary value to workers of a lower unemployment rate at the time of job separation. By examining the decision between reenlisting and exiting the military, we find that service members would sacrifice 1.5-2 percent in earnings to avoid a 1 percentage point increase in the home-state unemployment rate during job search. Comparing these quantities to realized earnings losses for those who separate suggests that the value of non-work time and other factors (e.g., private and public transfers) offset less than one-third of the earnings losses caused by exiting the military into a weak labor market.Citation
Borgschulte, Mark, and Paco Martorell. 2018. "Paying to Avoid Recession: Using Reenlistment to Estimate the Cost of Unemployment." American Economic Journal: Applied Economics, 10 (3): 101-27. DOI: 10.1257/app.20160257Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- J31 Wage Level and Structure; Wage Differentials
- J45 Public Sector Labor Markets
- J64 Unemployment: Models, Duration, Incidence, and Job Search
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