FINANCE / HOUSING

Evaluating the labor-market effects of compulsory military service

Article

This article considers the impact that Germany’s compulsory military service (CMS) had on the lifetime earnings potential of those who served, compared to those born afterwards. The research discussed in this article finds that there may be observable benefits, for example valuable transferable skills learned, for those who completed compulsory service. However, the researchers question whether benefits are directly related to military service, or if in actuality it may be coincidental. For example, if healthier people were recruited into CMS then, irrespective of their military service, these people may have enjoyed higher earning potential than may their counterparts.

Abstract

We identify the causal effect of compulsory military service on conscripts’ subsequent labor-market outcomes by exploiting the regression-discontinuity design of the military draft in Germany during the 1950s. Consistent estimates of military service on lifetime earnings, wages, and days of employment are obtained by comparing men born before July 1, 1937 (the ‘‘White Cohort’’) who were exempted from compulsory military service to men who were born on or shortly after this threshold date and who faced a positive probability of being drafted. We find that the putative earnings advantage and wage premium of those who served in the armed forces vanish when selection effects are taken into account.

Full Reference

Bauer, T. K., Bender, S., Paloyo, A. R. and Schmidt, C. M., 2012. Evaluating the labor-market effects of compulsory military service. European Economic Review, 56, 814-829.