A benefit-cost analysis of expanding the number of personnel in the Norwegian Armed Forces in the time of corona

FFI-Report 2021

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Report number

21/00886

ISBN

978-82-464-3340-0

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PDF-document

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1.1 MB

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Petter Y. Lindgren Ane Ofstad Presterud
The starting point of this report is the stepwise increase of 550 man-years in the Armed Forces presented in the government’s first proposed long term plan for the Norwegian Armed Forces (LTP) from April 2020. In the context of the dramatic downturn in the business cycle and the rising unemployment caused by the corona pandemic and the governments’ mitigation measures, we study the economic profitability of an immediate recruitment of personnel compared to the stepwise increase in personnel. To take into account the unusual uncertainty related to the future of the Norwegian labor market, we utilize different economic scenarios. The scenarios differ in terms of the timing of the return of the labor market to normal conditions, from half a year to four years after July 2020. We identify potential benefits and costs of the expedite recruitment strategy through a literature review of the scholarship on the costs of job displacement. The economic analysis of the fast recruitment strategy shows a likely increase in economic value for the Norwegian society. The economic value is positive as long as the unemployment rate is high for at more than half a year after program initiation. The net benefits are linear in the number of personnel, meaning that a reduced scope will be positive as long as the results for the whole project is positive. We study the sensitivity of the results from changes in the central assumptions in the model. One important assumption of the conclusion of positive net benefits is increased future defense budgets. We therefore assess the net benefits of the expedite recruitment strategy in an alternative where the government and society do not value an increase in the number of man-years in the Armed Forces the next years. We find that the net benefits of the immediate recruitment are highly dependent on the assumption of increased future defense budgets, but robust to moderate negative changes in other assumptions in the benefit-cost model.

About publication

Report number

21/00886

ISBN

978-82-464-3340-0

Format

PDF-document

Size

1.1 MB

Download publication

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