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The Effect of Separation Bonuses on Voluntary Quits: Evidence from the Military's Downsizing
Author(s) -
Mehay Stephen L.,
Hogan Paul F.
Publication year - 1998
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.1998.tb00132.x
Subject(s) - layoff , incentive , turnover , navy , separation (statistics) , labour economics , economics , business , finance , actuarial science , microeconomics , management , unemployment , computer science , law , political science , machine learning , economic growth
This paper analyzes the decision of mid‐career personnel to voluntarily leave the U.S. military in response to a financial incentive program. A model of the separation decision is tested using data on Navy and Air Force enlisted personnel who were targeted for the buyout in 1992. Two alternative estimates are provided, one from a fixed effects model and one from a structural, annualized cost of leaving model. Our basic results indicate the financial incentive had a modest effect in inducing additional quits. The impact of the separation bonus, however, was much larger for occupations facing a threat of involuntary layoff.