Angrist-AER-1990

AmericanEconomicAssociationLifetimeEarningsandtheVietnamEraDraftLottery:EvidencefromSocialSecurityAdministrativeRecordsAuthor(s):JoshuaD.AngristSource:TheAmericanEconomicReview,Vol.80,No.3(Jun.,1990),pp.313-336Publishedby:AmericanEconomicAssociationStableURL::08/03/201001:33YouruseoftheJSTORarchiveindicatesyouracceptanceofJSTOR'sTermsandConditionsofUse,availableat://=aea.EachcopyofanypartofaJSTORtransmissionmustcontainthesamecopyrightnoticethatappearsonthescreenorprintedpageofsuchtransmission.JSTORisanot-for-profitservicethathelpsscholars,researchers,andstudentsdiscover,use,andbuilduponawiderangeofcontentinatrusteddigitalarchive.Weuseinformationtechnologyandtoolstoincreaseproductivityandfacilitatenewformsofscholarship.FormoreinformationaboutJSTOR,[e-mail]ioniscollaboratingwithJSTORtodigitize,preserveandextendaccesstoTheAmericanEconomicReview.*Therandomlyassignedriskofinductiongeneratedbythedraftlotteryisusedtoconstructestimatesoftheeffectofveteranstatusoncivilianearnings.Theseestimatesarenotbiasedbythefactthatcertaintypesofmenaremorelikelythanotherstoserviceinthemilitary.SocialSecurityadministrativerecordsindicatethatintheearly1980s,longaftertheirserviceinVietnamwasended,theearningsofwhiteveteranswereapproximately15percentlessthantheearningsofcomparablenonveterans.(JEL824)Acentralquestioninthedebateovermili-tarymanpowerpolicyiswhetherveteransareadequatelycompensatedfortheirservice.Thepoliticalprocessclearlyreflectsthede-siretocompensateveterans:sinceWorldWarII,millionsofveteranshaveenjoyedbenefitsformedicalcare,educationandtraining,housing,insurance,andjobplace-ment.RecentlegislationprovidesadditionalbenefitsforveteransoftheVietnamera.Yet,academicresearchhasnotshownconclu-sivelythatVietnam(orother)veteransareworseoffeconomicallythannonveterans.ManystudiesfindthatVietnamveteransearnlessthannonveterans,butothersfindposi-tiveeffects,oreffectsthatvarywithageandschooling.Regardingthegeneralpositionofveterans,amemberoftheTwentiethCen-turyFund'sTaskForceonPoliciesTowardVeteransconcludesthatWithinanyagegroup,veteranshavehigherincomes,moreeducation,andlowerunemploymentratesthantheirnonveterancounterparts.'Thegoalofthispaperistomeasurethelong-termlabormarketconsequencesofmil-itaryserviceduringtheVietnamera.Previ-ousresearchcomparingcivilianearningsbyveteranstatusmaybebiasedbythefactthatcertaintypesofmenaremorelikelytoserveinthearmedforcesthanothers.Forexam-ple,menwithrelativelyfewcivilianopportu-nitiesareprobablymorelikelytoenlist.Es-timationstrategiesthatdonotcontrolfordifferencesincivilianearningspotentialwillincorrectlyattributelowercivilianearningsofveteranstomilitaryservice.TheresearchreportedhereovercomessuchstatisticalproblemsbyusingtheVietnameradraft*DepartmentofEconomics,HarvardUniversity,Cambridge,MA02138.GratefulthanksgotoWarrenBuckler,CresstonSmith,AdaEnis,andBeaMatsuifortheirassistanceinproducingtheSocialSecuritydata;toChesterBowieforhishelpinproducingtheSIPPdata;andtoMikeDoveforprovidingDMDCadministrativerecords.SpecialthanksalsogotoDavidCardandWhitneyNewey,fromwhoseinstructionandcommentsIhavebenefitedgreatly,andtoAlanKruegerandananonymousreferee,whosecarefulreviewsofanearlierdraftledtosubstantialimprovement.DatacollectionforthisprojectwasfundedbythePrincetonIndustrialRelationsSection.FundsforcomputationandfinancialsupportoftheauthorwereprovidedbytheIndustrialRelationsSection,thePrincetonDepartmentofEco-nomics,theSloanFoundation,andtheOlinFounda-tion.'ThequoteisfromMichaelTaussig(1974,p.51).LegislationpertainingtoveteransbenefitsisoutlinedinVeteransAdministration(1984)andinotherannualreportsoftheVeteransAdministration.StudiesbySherwinRosenandPaulTaubman(1982),SaulSchwartz(1986),andJonCraneandDavidWise(1987)findthatVietnamveteransearnlessthannonveterans.DennisDeTray(1982)andMarkBergerandBarryHirsch(1983)findsomepositiveeffectsfordifferentageandschoolingclasses,andVeteransAdministration(1981a)researchefsfindanoverallpositiveeffect.313314THEAMERICANECONOMICREVIEWJUNE1990lotteriestosetupanaturalexperimentthatrandomlyinfluencedwhoservedinthemili-tary.2SectionIdescribestheSocialSecurityad-ministrativerecordsusedintheempiricalworkandprovidesbackgroundonthedraftlotteries.Ineachlottery,priorityforinduc-tionwasdeterminedbyaRandomSequenceNumber(RSN)from1-365thatwasas-signedtobirthdatesinthecohortbeingdrafted.MenwerecalledforinductionbyRSNuptoaceilingdeterminedbytheDe-fens