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Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security
Administrative Records
Author(s): Joshua D. Angrist
Source: The American Economic Review , Jun., 1990, Vol. 80, No. 3 (Jun., 1990), pp. 313336
Published by: American Economic Association
Stable URL: https://www.jstor.org/stable/2006669
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Lifetime Earnings and the Vietnam Era Draft Lottery:
Evidence from Social Security
Administrative Records
By JOSHUA D. ANGRIST*
The randomly assigned risk of induction generated by the draft lottery is used to
construct estimates of the effect of veteran status on civilian earnings. These
estimates are not biased by the fact that certain types of men are more likely than
others to service in the military. Social Security administrative records indicate
that in the early 1980s, long after their service in Vietnam was ended, the
earnings of white veterans were approximately 15 percent less than the earnings
of comparable nonveterans. (JEL 824)
A central question in the debate over mili-
schooling. Regarding the general position of
tary manpower policy is whether veterans
are adequately compensated for their service.
The political process clearly reflects the de-
veterans, a member of the Twentieth Century Fund’s Task Force on Policies Toward
Veterans concludes that “Within any age
group, veterans have higher incomes, more
sire 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 veterans of the Vietnam era. Yet,
academic research has not shown conclusively that Vietnam (or other) veterans are
worse off economically than nonveterans.
Many studies find that Vietnam veterans earn
less than nonveterans, but others find positive effects, or effects that vary with age and
education, and lower unemployment rates
than their nonveteran counterparts.”‘
The goal of this paper is to measure the
long-term labor market consequences of military service during the Vietnam era. Previ-
ous 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 probably more likely to enlist. Estimation strategies that do not control for
differences in civilian earnings potential will
incorrectly attribute lower civilian earnings
of veterans to military service. The research
reported here overcomes such statistical
problems by using the Vietnam era draft
*Department of Economics, Harvard University,
Cambridge, MA 02138. Grateful thanks go to Warren
Buckler, Cresston Smith, Ada Enis, and Bea Matsui for
their assistance in producing the Social Security data; to
Chester Bowie for his help in producing the SIPP data;
and to Mike Dove for providing DMDC administrative
records. Special thanks also go to David Card and
‘The quote is from Michael Taussig (1974, p. 51).
Whitney Newey, from whose instruction and comments
Legislation pertaining to veterans benefits is outlined in
I have benefited greatly, and to Alan Krueger and an
Veterans Administration (1984) and in other annual
anonymous referee, whose careful reviews of an earlier
reports of the Veterans Administration. Studies by
draft led to substantial improvement. Data collection Sherwin Rosen and Paul Taubman (1982), Saul Schwartz
for this project was funded by the Princeton Industrial
(1986), and Jon Crane and David Wise (1987) find that
Relations Section. Funds for computation and financialVietnam veterans earn less than nonveterans. Dennis
support of the author were provided by the IndustrialDeTray (1982) and Mark Berger and Barry Hirsch
Relations Section, the Princeton Department of Eco(1983) find some positive effects for different age and
nomics, the Sloan Foundation, and the Olin Foundaschooling classes, and Veterans Administration (1981a)
tion.
researchefs find an overall positive effect.
313
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314 THE AMERICAN ECONOMIC REVIEW JUNE 1990
lotteries to set up a natural
experiment
Section IV tests
the hypothesis that veter-that
randomly influenced ans
who
earn lessserved
than nonveterans
in
because
the
theymilitary.2
have less civilian labor market experience.
Results in this section suggest that the earnSection I describes the Social Security adings loss to white veterans is equivalent to a
ministrative records used in the empirical
work and provides background on the draft loss of two years of civilian labor market
lotteries. In each lottery, priority for induc- experience. Section V reviews some of the
potential pitfalls in estimation based on the
tion was determined by a Random Sequence
draft lottery. Section VI offers conclusions
Number (RSN) from 1-365 that was asand indicates directions for future research.
signed to birthdates in the cohort being
drafted. Men were called for induction by
I. Background and Data
RSN up to a ceiling determined by the Defense Department, and only men with lottery
A. National Random Selection3
numbers below the ceiling could have been
drafted. Therefore, men with lottery numThere were five draft lotteries during the
bers below the ceiling are referred to here as
“draft-eligible.”
Vietnam War period. The 1970 lottery cov-
ered 19- to 26-year-old men born in 1944-50,
The empirical analysis begins in Section II
with estimates of the effect of draft eligibility although most of the men drafted in 1970
on earnings. If draft eligibility is correlated were born in 1950. Other lotteries were restricted to 19- and 20-year-olds. The 1971
with veteran status but uncorrelated with
lottery covered men born in 1951, the 1972
other variables related to earnings, then
lottery covered men born in 1952, and so on,
earnings differences by draft-eligibility status
through 1975. However, no one was drafted
can be attributed to military service. In Secafter 1972, and congressional conscription
tion III, information on the proportions of
authority expired in July 1973.
draft-eligible and draft-ineligible men who
Draft lottery RSNs were randomly asactually served in the military is used to
signed in a televised drawing held a few
convert estimates of the effect of draft eligimonths before men reaching draft age were
bility into estimates of the effect of military
to be called.4 Draft-eligibility ceilings-RSN
service. The assumptions underlying this
procedure are those that justify instrumental 195 in 1970, RSN 125 in 1971, and RSN 95
variables estimation; in principle, any func- in 1972-were announced later in the year,
tion of the RSN provides a legitimate instru- once Defense Department manpower needs
were known. As a consequence of this delay,
ment for veteran status. In the second part
many men with low numbers volunteered for
of Section III, an instrumental variables estithe military to avoid being drafted and to
mation strategy is developed which is more
efficient than one based solely on draft-eligi- improve their terms of service (Angrist
1989b). There was even a behavioral rebility status. Results in Section III indicate
sponse to the lottery in enlistment rates for
that white veterans earn approximately 15
percent less than nonveterans as much as ten the 1953 cohort, although no one born in
years after their discharge from the military. 1953 was drafted. In the analysis that follows, the “draft-eligibility ceiling” for men
born in 1953 is set at RSN 95, the highest
lottery number called in 1972.
2A candid assessment of the problems caused by
nonrandom selection for military service is given by
Crane and Wise (1987), who note they were unable to
use econometric sample selection models to generate
3This section draws on Curtis Tarr (1981) and the
robust estimates of the effects of military service on
civilian earnings. The first researchers to use the lottery Selective Service System (1986).
4Men born from 1944-49 were already of draft age
to solve the selection problem were Norman Hearst,
when the 1970 lottery was held on December 1, 1969.
Tom Newman, and Stephen Hulley (1986), who present
For nonveterans in this group, subsequent liability for
lottery-based estimates of delayed effects of military
service on mortality.
service was determined by 1970 lottery numbers.
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VOL. 80 NO. 3 A NGRIST: LIFETIME EA RNINGS A ND VIETNA M ERA DRA FT LOTTER Y 315
Only the initial selection process was based
on RSN order. Subsequent selection from
the draft-eligible, nondeferred pool was
based on a number of criteria. The most
important screening criteria were the preinduction physical examination and a mental
aptitude test. In 1970, for example, half of
all registrants failed pre-induction examinations and 20 percent of those who passed
were eliminated by physical inspections conducted at induction (Selective Service System, 1971). Of course, the fact that armed
forces selection criteria were ultimately not
random does not mean that the initial priority for induction was not randomly assigned
by RSN.
The year 1970 was the last time men over
the age of 20 were drafted. In principle,
nonveterans born between 1944 and 1949
continued to be at risk of induction in the
1970 lottery, but the majority of men who
ended up serving from these cohorts had
already entered the military by the time of
the 1970 lottery drawing. Veterans born from
1944-49 who managed to avoid service until
1970 may not constitute a representative
sample. Therefore, the analysis here is restricted to men who turned 19 in the year
they were at risk of induction. This sample
includes men who were born between 1950
and 1953.
B. Social Security Earnings Data
Earnings data used in this study are drawn
from the Social Security Administration’s
(SSA) Continuous Work History Sample
(CWHS). The CWHS data set, described in
detail in the Appendix, is a one percent
sample drawn from all possible Social Security numbers. The CWHS includes two earnings series: the first contains information on
the 1964-84 earnings of men in employment
covered by FICA (Social Security) up to the
Social Security taxable maximum. It also
includes FICA taxable earnings from selfemployment. The second series, beginning in
1978, contains total compensation as reported on Internal Revenue Service Form
W-2, excluding earnings from self-employment. In principle, the W-2 earnings data are
neither censored nor limited to earnings from
Social Security taxable employment. However, because SSA procedures for the collection of W-2 forms are relatively new, W-2
earnings data are probably less reliable than
the FICA data.
The original CWHS data set does not
contain information on date of birth. SSA
programmers matched date of birth variables to the CWHS in a special extract created for this project. Lottery numbers were
then matched to dates of birth, using tables
published in the 1969-73 Semiannual Reports of the Director of Selective Service.
The Internal Revenue Service limits disclosure of data collected for tax purposes.
To adhere to these disclosure requirements,
the SSA could release only aggregate data.
The aggregate data set contains sample
statistics for cells defined by year of earnings, year of birth, race, and five consecutive
lottery numbers. Cell statistics include
means, variances, fraction with earnings
equal to the taxable maximum, fraction with
earnings above the taxable maximum, fraction with zero earnings, and number of observations in each cell.
II. The Effect of Draft Eligibility
on Earnings
Figure 1 shows the history of FICA tax-
able earnings for draft lottery participants
born between 1950 and 1953. For each cohort there are two lines drawn: one for
draft-eligible men, and one for men with
lottery numbers that exempted them from
the draft.
The impact of draft eligibility on the earnings profiles is striking. There appears to be
no difference in earnings until the year of
conscription risk in the draft lottery. Subsequently, the earnings of draft-eligible white
men born in 1950-52 fall below the earnings
of draft-ineligible white men born in 195052. The earnings of draft-eligible nonwhites
also fall below the earnings of other non-
5Eamings are in 1978 dollars. The deflator used for
all tabulations is the CPI on p. 313 of The Economic
Report of the President (Council of Economic Advisors,
1988).
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316 THE AMERICAN ECONOMIC REVIEW JUNE 1990
3000 –
2000
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