The Dynamic Cost of the Draft

27 Pages Posted: 29 Nov 2002

See all articles by Morten I. Lau

Morten I. Lau

Durham Business School

Panu Poutvaara

University of Helsinki - Department of Economics; Helsinki Center of Economic Research (HECER); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Andreas Wagener

Leibniz Universit├Ąt Hannover - Economics and Business Administration Area; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Vienna University of Economics and Business Administration

Date Written: September 2002

Abstract

We propose a dynamic general equilibrium model with human capital accumulation to evaluate the economic consequences of compulsory services (such as military draft or social services). Our analysis identifies a so far ignored dynamic cost arising from distortions in time allocation over the life-cycle. We provide conservative estimates for the excess burden that arises when the government relies on forced labor rather than on income taxation to finance public expenditures. Our results suggest that eliminating the draft could produce considerable dynamic gains, both in terms of GDP and lifetime utility.

Keywords: Conscription, Draft, Time Allocation, Distortionary Taxation, Computable General Equilibrium Models

JEL Classification: H20, H57, J22, C68

Suggested Citation

Lau, Morten Igel and Poutvaara, Panu and Wagener, Andreas, The Dynamic Cost of the Draft (September 2002). CESifo Working Paper Series No. 774. Available at SSRN: https://ssrn.com/abstract=344482

Morten Igel Lau

Durham Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Panu Poutvaara

University of Helsinki - Department of Economics ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

HOME PAGE: http://www.valt.helsinki.fi/blogs/poutvaar/

Helsinki Center of Economic Research (HECER) ( email )

FI-00014 Helsinki
Finland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

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

Andreas Wagener (Contact Author)

Leibniz Universit├Ąt Hannover - Economics and Business Administration Area ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Vienna University of Economics and Business Administration ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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