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Vietnam Era Military Service Impact on Earnings: Analyzing the Draft Lottery and Post-Service Income

Explore the impact of Vietnam era military service on earnings through the lens of the Draft Lottery system. Learn about draft procedures, service statistics, and the economic implications for draftees. The model examines how being drafted affected earnings compared to those who were not in service. Discover the relationship between military service and post-service income using statistical analysis.

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Vietnam Era Military Service Impact on Earnings: Analyzing the Draft Lottery and Post-Service Income

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  1. IV/2SLS models

  2. Zi=0 Zi=1 0=0.80 1=0.57

  3. 0=3186 1=3278

  4. Vietnam era service • Defined as 1964-1975 • Estimated 8.7 million served during era • 3.4 million were in SE Asia • 2.6 million served in Vietnam • 1.6 million saw combat • 203K wounded in action, 153K hospitalized • 58,000 deaths • http://www.history.navy.mil/library/online/american%20war%20casualty.htm#t7

  5. Vietnam Era Draft • 1st part of war, operated liked WWII and Korean War • At age 18 men report to local draft boards • Could receive deferment for variety of reasons (kids, attending school) • If available for service, pre-induction physical and tests • Military needs determined those drafted

  6. Everyone drafted went to the Army • Local draft boards filled army. • Priorities • Delinquents, volunteers, non-vol. 19-25 • For non-vol., determined by age • College enrollment powerful way to avoid service • Men w. college degree 1/3 less likely to serve

  7. Draft Lottery • Proposed by Nixon • Passed in Nov 1969, 1st lottery Dec 1, 1969 • 1st lottery for men age 19-26 on 1/1/70 • Men born 1944-1950. • Randomly assigned number 1-365, Draft Lottery number (DLN) • Military estimates needs, sets threshold T • If DLN<=T, drafted

  8. Questions? • What are the research questions? • What can we NOT obtain estimates from observational data?

  9. If volunteer, could get better assignment • Thresholds for service • Draft Year of Birth Threshold • 1970 1946-50 195 • 1971 1951 125 • 1972 1952 95 • Draft suspended in 1973

  10. Model • Sample, men from 1950-1953 birth cohorts • Yi = earnings • Xi = Vietnam military service (1=yes, 0=no) • Zi = draft eligible, that is DLN <=T • (1=yes, 0=no)

  11. Put this all together • Model of interest • Yi = β0 + xiβ1 + εi • First stage • xi = α0 + ziα1 + μi • α1=(dx/dz)

  12. 1st stage • Because Z is dichotomous (1 and 0), this males it easy • 1 = mean of X when treated (zi =1) =α0 + ziα1 = α0 + α1 • 0 = mean of X when not treated (zi=0) =α0 + ziα1 = α0 • 1 - 0 = α1 (change in military service from having a low DLN)

  13. Intention to treat • yi = γo + ziγ1 + vi • γ1 = dy/dz=(dy/dx)(dx/dz)

  14. Intention to treat • yi = γo + ziγ1 + vi • 1 = mean of y when treated (z=1) • γo + ziγ1 = γo + γ1 • 0 = mean of y when not treated (z=0) • γo + ziγ1 = γo • 1 - 0 = γ1 (difference in earnings for those drafted and those not)

  15. Divide ITT by 1st stage • γ1/α1 = (dy/dx)(dx/dz)/(dx/dz) = dy/dx • Recall the equation of interest • yi = β0 + xiβ1 + εi • The units of measure are β1 = dy/dx • So the ratio γ1/α1 is an estimate of β1

  16. β1 = dy/dx • β1 = [1 - 0]/[1 - 0]

  17. 1 o

  18. Graph of 1 - 0

  19. 1 - 0 in numbers

  20. Βiv= (1 - 0)/(1 - 0) = -487.8/0.159 = $3067.9 CPI78 = 65.2 CPI81=90.9 65.2/90.9 = .7173 .717*3067.92 = $2199

  21. 1 o

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