Principal investigator: Viviane Pires Ribeiro
Paper Title: Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records
Authors: Joshua D. Angrist
Location of the Intervention: Vietnam
Sample Size: Not specified
Main theme: Labor market
Main Variable of Interest: Earnings from military service
Type of Intervention: Analysis of the long-term consequences of military service on the labor market.
Methodology: Empirical analysis
Angrist (1990) argues that certain types of men are more prone to military service than others; thus, the author analyzes the long-term consequences of military service on the labor market during the Vietnam era. Social Security administrative records indicate that, in the early 1980s, some time after completing their service in Vietnam, the earnings of white veterans were approximately 15% lower than the earnings of non-veterans.
Evaluation Context
A central issue in the debate over military manpower policy is whether veterans are adequately compensated for their service. The policy process clearly reflects a desire to compensate veterans: since World War II, millions of veterans have enjoyed benefits for medical care, education and training, housing, insurance, and job placement. Recent legislation provides additional benefits for Vietnam-era veterans. However, academic research has not conclusively shown that Vietnam (or other) veterans are worse off economically than non-veterans. Many studies have found that Vietnam veterans earn less than non-veterans, but others have found positive effects, or effects that vary with age and education.
Intervention Details
The study conducted by Angrist (1990) sought to measure the long-term consequences of military service on the labor market during the Vietnam era. To this end, randomly assigned and lottery-generated risk induction was used to construct estimates of the effect of veteran status on civilian earnings. These estimates, according to the author, are not biased by the fact that certain types of men are more prone to military service than others.
There were five draft lotteries during the Vietnam War period. The 1970 lottery covered men aged 19 to 26 born in 1944–50, although most men drafted in 1970 were born in 1950. Other lotteries were restricted to young men aged 19 and 20. The 1971 lottery covered men born in 1951, the 1972 lottery covered men born in 1952, and so on, until 1975. However, no one was drafted after 1972, and Congressional draft authority expired in July 1973.
The year 1970 was the last time men over 20 years old were drafted. In principle, non-veterans born between 1944 and 1949 remained at risk of induction in the 1970 lottery, but most of the men who ended up serving in these cohorts had already entered the army by the time of the 1970 lottery drawing. Veterans born between 1944-49 who managed to avoid service until 1970 may not constitute a representative sample. Therefore, the analysis performed by Angrist (1990) is restricted to men who turned 19 during the period in which they were at risk of induction. This sample includes men born between 1950 and 1953.
In each lottery, priority for induction was determined by a Random Sequence Number (RSN) from 1-365 that was assigned to birth dates in the cohort being drawn. Men were drafted by RSN up to a ceiling determined by the Department of Defense, and only men with lottery numbers below the ceiling could have been drafted. Therefore, men with lottery numbers below the ceiling are referred to as “eligible for enlistment.”
The income data used in the study were extracted from the Continuous Work History Sample (CWHS) of the Social Security Administration (SSA).
Methodology Details
In the empirical analysis, estimates are made of the effect of enlistment eligibility on earnings. If eligibility for military service is correlated with veteran status but not with other earnings-related variables, wage differences by military service eligibility status can be attributed to military service.
Information on the proportions of eligible and ineligible men who actually served in the armed forces is used to convert estimates of the effect of enlistment eligibility into estimates of the effect of military service. The assumptions underlying this procedure are those that justify the estimation of instrumental variables; in principle, any Random Sequence Number function provides a legitimate instrument for veteran status. Furthermore, the author develops an instrumental variable estimation strategy that is more efficient than one based solely on enlistment eligibility status.
Results
Estimates based on the draft lottery indicate that up to ten years after discharge from service, white veterans who served at the end of the Vietnam era received substantially less than non-veterans. The annual loss of income for white veterans is on the order of US$3.500, or about 15% of their annual salary in the early 1980s. In contrast, the estimated effects on non-white veterans are not statistically significant.
The study also proposes a simple explanation for the loss of income among white veterans: veterans earn less because their military experience is only a partial substitute for the civilian labor market experience lost in the armed forces. Goodness-of-fit tests suggest that, for whites, the time series coefficients of veteran status are consistent with this hypothesis. Estimated experience gain profiles using Social Security data indicate that white veterans suffered a reduction in income equivalent to the loss of two years of civilian labor market experience.
Lessons in Public Policy
Angrist (1990) argues that previous research comparing civilian earnings by veteran status may be biased by the fact that certain types of men are more likely to serve in the armed forces than others. For example, men with relatively few civilian opportunities are likely more likely to enlist. Estimation strategies that do not control for differences in potential civilian earnings will incorrectly attribute veterans' lower civilian earnings to military service. Thus, the author's research overcomes these statistical problems by using Vietnam-era lotteries to create a natural experiment that randomly influences who served in the armed forces.
Analysis of Social Security administrative records indicates that, in the early 1980s, some time after completing their service in Vietnam, the earnings of white veterans were approximately 15% lower than the earnings of non-veterans. This analysis naturally leads to further research on several topics. One is the question of alternatives to explaining the loss of experience as the reason for the reduction in white veterans' earnings. Veteran status may be a screening device, or there may be cohort size effects. Another question for future research is whether eligibility for military service affected educational and career plans independently of its effect on military service. The lottery may provide a useful tool for research into changes in educational performance in the 1960s and 1970s.
Furthermore, it is also relevant to reconcile the loss of income for Vietnam-era veterans with the apparent benefits of military service for World War II veterans and veterans of other eras. Although OLS regressions generally show that the effect of World War II veteran status is large, positive, and significant, these results may, in fact, be a consequence of selection bias.
References
ANGRIST, Joshua D. Lifetime earnings and the Vietnam era draft lottery: evidence from social security administrative records. The American Economic Review, P. 313-336, 1990.
