Seminar den 31. marts 2014

Opportunity Cost and the Incidence of a Draft Lottery

Abstract

Military conscription implicitly taxes draftees. Those who would have volunteered at the market wage may be forced to serve for lower wages, and those with higher opportunity costs will be forced to serve regardless, yet little is known about the distribution of this burden. We exploit the Danish draft lottery to estimate the causal effect of military service on labor earnings of young men across the cognitive ability distribution. We find that high ability men who are induced to serve face a 7 percent earnings penalty, whereas low ability men face none. Educational career disruption is an important channel.

JEL Classification: J24, J31, J45
Keywords: conscription, military service, earnings, draft lottery

Contacts: Battista Severgnini and Cédric Schneider