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.
|Original language||English (US)|
|Number of pages||53|
|State||Published - Feb 1 2016|
|Name||IZA Discussion Paper|
- welfare cost of business cycles
- labor market entry
- military reenlistment