Abstract
Textbook discussions of the economics of the military labor market usually adopt the partial equilibrium reasoning used by Oi [8] and Hansen and Weisbrod [5] in arguing for the efficiency of the volunteer military.' The basic argument is that a draft will tend to misallocate individuals between the civilian and military sectors. Without necessarily disagreeing with that conclusion, we maintain that a volunteer military must be placed in a general equilibrium framework in order properly to analyze all of its important features. Our relatively simple model assumes a pure labor economy where all individuals have the same utility function and the same productivity as soldiers, but individuals vary according to the civilian real wage they could earn. The persons in the economy face an external threat which can be reduced by having some of them devote labor time to being soldiers. The wages of soldiers are paid for by taxes on civilians. The voluntary nature of military service requires that all soldiers are at least as well off as they would be as civilians. Equilibrium in the labor market requires that those serving as soldiers are the individuals with the lowest civilian wage rates. Since the formal model is timeless (static) in nature, the volunteer decision to be a soldier is essentially moment-to-moment. In actual practice, volunteers agree to long term contracts for military service. Because long term contracts restrict the option to leave military service in the short term, the utility of a soldier may not be as high as it would be as a civilian. While the analysis of our simpler version of the volunteer military without long term contracts may lead to less realistic conclusions, the model is more tractable and offers insights into why long term contracts may be desirable. A virtue of a general equilibrium model is that it requires a rigorous specification of the factors giving rise to the demand for a military. Clearly, a military is only useful if the labor of
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