A large literature attempts to explain compensation and personnel policies in large organizations. Three features of the U.S. military system—flat rank spreads in pay, a relatively generous pension, and heavy reliance on up‐or‐out promotions—are at variance with common practices in large civilian organizations. This article develops a model of individual decision making in a large, hierarchical organization and uses the model to explain these apparent puzzles. The lack of lateral entry and heterogeneity in entrants’ abilities and preferences for military service play key roles in the observed policies.

Firms often view job applicant referrals from current employees as more informative than direct applications or referrals through formal labor market intermediaries such as placement firms. The authors argue that old boy networks reduce employers' uncertainty about worker productivity. Using Jovanovic's job matching model, they show that workers hired through the old boy network should (1) earn higher initial salaries, (2) experience lower subsequent wage growth on the job, and (3) stay on the job longer than otherwise comparable workers hired from outside the network. They find considerable support for this theory using data from the 1972 Survey of Natural and Social Scientists and Engineers.

The military drawdown program of the early 1990's provides an opportunity to obtain estimates of personal discount rates based on large numbers of people making real choices involving large sums. The program offered over 65,000 separatees the choice between an annuity and a lump-sum payment. Despite break-even discount rates exceeding 17 percent, most of the separatees selected the lump sum—saving taxpayers $1.7 billion in separation costs. Estimates of discount rates range from 0 to over 30 percent and vary with education, age, race, sex, number of dependents, ability test score, and the size of payment.

The literature on the Fisher effect has ignored the potential relationship between inflation and long-term interest rates. Using an expectations model of the term structure of interest rates, the authors establish the conditions under which innovations in short-term inflation will be transmitted to long-term as well as short-term interest rates. Cointegration tests find support for both the Fisher effect and the expectations theory of the term structure.

This paper identifies three alternative approaches to the duration of unemployment—the screening, the formal search theory, and the intensity of search approaches. From these approaches, a unified model of the weekly probability of leaving unemployment (WPOLU) is developed. In this model, WPOLU is the product of the weekly probability of job vacancy location, the probability of offer extension, and the probability of offer acceptance. The determinants of these probabilities are analyzed. The model is tested with data from the 1970 Census Employment Survey. Evidence supporting all three approaches is found. An eclectic view of unemployment is called for.

John T. Warner, Matthew S. Goldberg, The Influence of Non-Pecuniary Factors on Labor Supply: The Case of Navy Enlisted Personnel, The Review of Economics and Statistics, Vol. 66, No. 1 (Feb., 1984), pp. 26-35