| Summary: | Approved for public release, distribution is unlimited === Efficient manpower utilization is essential to minimizing the cost, and a key element in that is the maintenance of the optimum balance between civilian and military manpower resources. Economic efficiency dictates that as the cost of military personnel begin to rise relative to the cost of direct hires, the Services would have an incentive to increase the use of direct hires, and vice versa. In our empirical analysis, results indicate that although DoD responded correctly to factor price changes measured in current dollars, DoD did not respond to changes in the real price of civilians. It should have substituted military personnel for civilians as the real price of civilians increased. In addition to the data analysis, this research reviews the issues on the concept of military-to-civilian conversions, determines the advantages and disadvantages of such conversions, examines the associated factors and their impact, and investigates the premise that such conversions could be detrimental to the military's mission even though they may be cost-effective.
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