Opportunity Cost and the Incidence of a Draft Lottery

38 Pages Posted: 5 Apr 2014

See all articles by Paul Bingley

Paul Bingley

Aarhus University - National Centre for Register-Based Research

Petter Lundborg

Lund University School of Economics and Management; Tinbergen Institute; IZA Institute of Labor Economics

Stéphanie Vincent Lyk-Jensen

Danish Transportation Research Institute

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 may 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.

Keywords: conscription, military service, earnings, draft lottery

JEL Classification: J24, J31, J45

Suggested Citation

Bingley, Paul and Lundborg, Petter and Vincent Lyk-Jensen, Stéphanie, Opportunity Cost and the Incidence of a Draft Lottery. IZA Discussion Paper No. 8057. Available at SSRN: https://ssrn.com/abstract=2420702

Paul Bingley (Contact Author)

Aarhus University - National Centre for Register-Based Research ( email )

8000 Århus C, 8210
Denmark

Petter Lundborg

Lund University School of Economics and Management ( email )

P.O Box 7080
Lund
Sweden

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Stéphanie Vincent Lyk-Jensen

Danish Transportation Research Institute

Kongens Lyngby DK-2800
Denmark

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