This thesis analyzes the effect of the United States Marine Corps instituting a lump sum Selective Reenlistment Bonus (SRB) Program on reenlistment decisions of first-term enlisted Marines. Between fiscal year 1982 and fiscal year 2000, Zone A reenlistees were paid 50 percent of their SRB on the date of reenlistment, and the remaining 50 percent was paid in annual installments over the reenlistment contract period. In fiscal year 2001, under the new program Marines received 100 percent of the SRB upon reenlisting. The thesis surveys the literature on models of enlisted retention. The thesis empirically examines the impact of personal characteristics, civilian pay, unemployment, and the lump sum bonus on reenlistment decisions. Marine retention probabilities under the lump sum payment program are compared to the probabilities under the standard partial-annuity payment system. The results show that the lump sum bonus is associated to a 5.8 percentage point increase in the reenlistment probability. A one-level increase in the SRB multiple during fiscal year 2001 is related to a reenlistment rate increase of 2.6 percentage points.
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