Re up? You're crazy! : retention versus mobility in today's army

Abstract

Retention practices in the U.S. Army face an incentive problem. The amount of work that officers undertake to retain a soldier should be based in part on those officers' expectations of accruing benefits. In this paper, I analyze Army National Guard retention rates to see if the possible mobility of a soldier (which affects his leadership's expected benefits) is systematically related to the probability he will be retained. A soldier's mobility translates into competition among military units for that soldier's service. There are two possible and contradictory effects of this competition. The first is the standard microeconomic effect of increasing competition in a monopsonistic environment. This would be expected to increase quantity (in this case, the quantity of soldiers retained). The second, less intuitive effect is that competition among battalions reduces a soldier's ability to effectively commit to long-term service with any battalion. This causes a reduction in quantity. I have found that the second effect dominates. This paper contributes to economic literature by improving the understanding of incentives in large organizations.