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Department of Economics, UCSBUC Santa Barbara

Peer Reviewed

Title:Soldiers of Fortune

Author:Bergstrom, Ted, University of California, Santa Barbara

Publication Date:07-01-1986

Series:Ted Bergstrom Papers

Permalink:http://escholarship.org/uc/item/1r7912t0

Additional Info:This paper was published in 1986 in Essays in Honor of K.J. Arrow, edited by Walter P. Hellerand Ross Starr.

Keywords:occupational choice, lottery, voluntary army

Abstract:This paper shows that if workers have identical wealths, abilities, and preferences then a draftlottery is Pareto superior to a voluntary army. It also shows that if being a civilian is a "normal good",then the optimal pay schedule will be such that people prefer not being chosen for the army. Thepaper shows how this idea extends to occupational choice in general and shows that pure gamblestaken prior to occupational choice can substitute for lotteries that determine one's occupation. Thispaper repairs what I think is a major flaw in standard general equilibrium theory, which assumesaway the nonconvexity of preferences that follows from the discreteness of occupational choice.

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