Optimal Assignment of Soldiers to Service-Units: A Supply and Demand Framework

Optimal Assignment of Soldiers to Service-Units: A Supply and Demand Framework

This study proposes a method for improving the quality of the soldierto- service-unit assignment of mandatory service soldiers in Korea by designing a proper pecuniary incentive. Based on soldiers’ preferences (supply) and the demand of units, we calculate the optimal allocation and compensating wage differentials using the Hungarian algorithm, a commonly used method for solving linear programming problems. The calculated outcome of the optimal allocation and compensating wage differentials achieves Pareto efficiency, which maximizes the sum of utility from military service while minimizing wage expenditure. In addition, the presented compensatory wage differentials are marketclearing prices based on a general equilibrium approach, which is flexible and responds to the demand and supply of the military internal labor market.