Association for Public Policy Analysis & Management

This paper examines what happens to the market for risky jobs when there is a positive shock to job risk. Theoretically, the shock will cause workers on the margin in risky jobs to find new jobs. This paper uses the military as a natural experiment. The army pays soldiers an additional “hazardous duty pay” every month while on deployment. In 2006, the military increased its presence in the Iraq, and needed additional soldiers. To meet goals, it selected several units, potentially at random, to extend deployment lengths for about three months on average. This paper finds a 3.7% decrease in likelihood of reenlistment at the end of the first term for all changes in deployment length as a result of additional deployment extensions. This aligns with theory suggesting that to keep soldiers with reservation wages on the margin, compensating wages should increase into the deployment.