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5. Determining Optimal Levels of Advertising and Recruiting Resources
Pages 90-111

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From page 90...
... There is by now a relatively well-developed body of econometric research that has identified some of the most important determinants of enlistment supply as well as the cost and effectiveness of various recruiting resources and the trade-offs among them. Estimates are based on the natural variation in key recruiting resources and outcomes (usually aggregated)
From page 91...
... ECONOMETRIC APPROACH TO ENLISTMENT SUPPLY From the beginning of the All-Volunteer Force, enlistment supply has been an ongoing topic of research.2 Econometric studies of enlistment supply have used either aggregate national time-series data or panel data that is, data over time disaggregated by some geographic level (e.g., state, county, Service-specific recruiting area)
From page 92...
... Warner, Simon, and Payne (2002) provide a detailed review of 15 econometric studies of enlistment supply conducted between 1985 and 1996.
From page 93...
... Furthermore, they argue that advertising must reach a minimum critical level before it has any impact on enlistment. Beyond this critical minimum level, increases in advertising increase highly qualified enlistments, first at an increasing rate and later at a decreasing rate.
From page 94...
... Estimates from Econometric Studies Table 5-1 outlines the empirical strategies of 16 enlistment studies of male highly qualified recruits carried out between 1985 and 2001.6 Eleven of these studies focused on a single Service. The factors that determine high-quality enlistment supply fall into three categories: (1)
From page 95...
... Using annual data at the Navy Recruiting District level, he estimated the elasticity of enlistments of highly qualified recruits with respect to all Navy advertising to be about 0.05. That is, doubling Navy advertising would raise Estimation procedure may account for the different recruiter elasticities estimated by Fernandez (1982)
From page 96...
... 96 EVALUATING MILITARY ADVERTISING AND RECRUITING TABLE 5-1 Empirical Strategies Beginning Ending Cross-Sectional # X- Services Date of Date of Frequency Unit of Sec Includec Study Study Study of Data Observation Units in Study Berner and Oct-80 Jan-90 Monthly Battalion 55 Army Daula (1993) Bohn and Oct-92 Sep-95 Monthly NRD 31 Navy Schmitz (1996)
From page 97...
... . max~m~zahon 54 Army Econometric Supply and 2-regime Some Log demand switching models regression model 33 Army Econometric Recruiter 2SLS and No Log utility maximum maximization likelihood 210 All Advertising Reduced SUR with No Log Mix Test form correction for serial correlation 66 Army, Educational 12-month first Yes Log Air Force, Assistance Reduced difference using Navy Test Program form LS with correction for heteroskedasticity 1 Navy Econometric Reduced Maximum No Linear form likelihood corrected for heteroskedasticity Continued
From page 98...
... NOTE: ADI = areas of dominant influence; AFEES = armed forces entrance examination station; MEPS = military entrance processing station; NRD = Navy recruiting district; PUMA = public-use microdata areas. FIML = full information maximum likelihood; IV = instru
From page 99...
... ADVERTISING AND RECRUITING RESOURCES 99 # X- Services Sec Included Study Theoretical Estimation Fixed Log or Units in Study Type Framework Procedure Effects? Linear 31 Navy Econometric Reduced LS with Yes Both form correction for serial correlation; IV for advertising in some models Reduced GLS No Log 5 Army General form heteroskedasticity 911 All Econometric Hybrid OLS corrected for Yes Log structural heteroskedasticity and reduced and serial form correlation; IV for some variables 66 Army Enlistment Recruiter Two-stage No Log Bonus utility procedure maximization using 3SLS 55 Army Econometric Enlistee OLS found that Yes Log utility correcting for maximization serial correlation did not affect estimates 41 All Econometric Reduced Effects Yes Log form 41 Navy Econometric Recruiter OLS and Yes Log utility fixed maximization effects 51 All Econometric Recruiter Fixed effects with Yes Both utility IV for some maximization variables mental variables; LS = least squares; GLS = generalized least squares; 0LS = ordinary least squares; 2SLS = 2-stage least squares; 3SLS = 2SLS followed by SUR; SUR = seemingly unrelated regressions.
From page 100...
... Reduced form, 1980 goals included Reduced form, 1981 goals included Structural model 1980 2SLS Structural model 1981 2SLS Structural model 1980 FIML Structural model 1981 FIML Dertouzos (1989) Army Navy Air Force Marines Fernandez (1982)
From page 101...
... ADVERTISING AND RECRUITING RESOURCES 101 Elasticities Service Joint Recruiters Advertising Measure Advertising Advertising National Impressions 0.208 NA 0.274 NA NA 0.221 NA NA 0.346 NA NA 0.139 NA NA 0.238 Expenditures Impressions and 0.089 NA 0.585 expenditures 0.107 NA 0.959 0.156 NA 0.826 NA NA 0.842 NA NA 0.466 NA NA 1.193 NA NA 1.086 NA NA 1.647 NA NA 1.529 0.028 -0.005 0.071 -0.001 0.016 0.028 0.008 0.023 0.227 0.526 0.303 0.470 0.295 0.274 0.090 Expenditures 0.140 1.270 Dollars 0.286 0.028 0.031 Impressions 0.021 0.009 Impressions 0.038 0.029 Impressions Continued
From page 102...
... Army Navy Air Force Marine Corps SUMMARY STATISTICS Mean Standard deviation Coefficient of variation 0.430 0.580 0.720 0.056 0.050 0.103 0.015 -0.034 -0.017 0.050 0.136 0.084 -0.013 -0.065 0.114 0.186 1.625 NOTE: 2SLS = 2-stage least squares; FIML = full information maximum likelihood; NRD = Navy recruiting district; 0LS = ordinary least squares.
From page 103...
... ADVERTISING AND RECRUITING RESOURCES 103 Elasticities Service Joint Recruiters Advertising Advertising Advertising Measure National Impressions 0.430 0.580 0.720 0.480 0.680 1.150 0.51 0.60 0.53 0.62 0.49 0.59 0.33 0.24 Expenditures 0.056 0.597 Expenditures 0.050 0.150 Expenditures Expenditures 0.103 0 0.371 0.015 -0.004 0.412 -0.034 0.004 -0.045 -0.017 0.001 0.487 0.050 -0.028 0.527 Expenditures 0.136 0.008 0.410 Impressions 0.084 -0.003 0.640 Impressions -0.013 0.015 0.480 Impressions -0.065 0.022 0.470 Impressions 0.114 0.010 0.551 0.186 0.015 0.368 1.625 1.545 0.667
From page 104...
... In models that separated advertising into TV and non-TV advertising, they obtained TV elasticity estimates of 0.09 and 0.05 for the Army and Navy, respectively, and non-TV estimates of 0.07 and 0.05 for those Services. But no relationship was found between Air Force and Marine Corps enlistments of highly qualified recruits and advertising.
From page 105...
... where C is the minimum total cost of recruiting H highly qualified recruits and L recruits with low qualification levels, and p is a vector of resource prices and Z are factors affecting cost that are beyond the control or choice of the Service. In addition to providing an estimate of the minimum total cost, the RCF also provides an estimate of the optimal levels of resources that constitute the cost.
From page 106...
... A greater responsiveness of enlistment to recruiting resources implies lower marginal cost. Consider the marginal cost of highly qualified enlistments brought about by an expansion of the recruiter force.
From page 107...
... calculated that, at an advertising spending level roughly double the average level prevailing in the FY 1993-1997 period, marginal advertising costs for highly qualified male contracts would fall to about $10,500. Furthermore, according to their calculations, marginal costs of the recruits obtained via TV advertising would continue to fall over a much higher range of spending before beginning to increase.ll Estimates of the Effects of Other Resources Econometric methods can be applied to estimate the effects of other resources not often considered in the traditional enlistment supply model.
From page 108...
... Failure to include all other variables increases the likelihood of obtaining a biased estimate of the effect. IMPROVEMENTS IN DOD RECRUITING RESEARCH Effects of Recruiters Aspects of the econometric estimates of the effects of recruiters on enlistment supply can be improved by a relatively straightforward extension of existing models.
From page 109...
... An alternative approach to allowing separate estimates by advertising campaign would be to try and isolate essential elements of an advertising theme and measure them in continuous variables. This would undoubtedly entail some subjectivity.
From page 110...
... More Flexible Functional Forms A limitation of much of the empirical research is that the functional forms of the econometric specifications have been relatively restricted. Perhaps one way to understand some of the implications of the particular functional forms is to consider an enlistment supply equation as analogous to a production function for recruits.
From page 111...
... Advertising data, which we discuss in several places, should contain information not simply on impressions or dollar expenditures, but also include a systematic characterization of advertising content, if these are to be evaluated. These data should, again, be able to be tied to the recruiting data at the lowest reasonable level of aggregation.


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