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Large Public Programs and Labor Outcomes: Evidence from the Military

Paper Session

Sunday, Jan. 3, 2021 10:00 AM - 12:00 PM (EST)

Hosted By: American Economic Association
  • Chair: Bruce Sacerdote, Dartmouth College

You Can’t Handle the Truth: The Effects of the GI Bill on Higher Education and Earnings

Andrew Barr
,
Texas A&M University
Laura Kawano
,
University of Michigan
Bruce Sacerdote
,
Dartmouth College
William Skimmyhorn
,
College of William & Mary
Michael Stevens
,
U.S. Department of the Treasury

Abstract

The Post 9/11 GI Bill (PGIB) is among the largest and most generous expansions of post- secondary educational subsidies ever enacted in the U.S. Using a variety of identification strategies, we examine the impact of the PGIB on veterans’ college going, degree completion, federal education tax benefit utilization, and longer-run earnings and demographic outcomes. We consider impacts on both veterans potentially induced to attend college by the policy, and on veterans already enrolled when the additional money arrived. Among those potentially induced to enroll, the introduction of the PGIB raised college enrollment by 5 percentage points and B.A. completion by 2 to 3 percentage points (on a base of 19 percentage points), but reduced average earnings seven years after separation from the Army by 2 percent. The negative impacts are concentrated among veterans induced into college. We explore whether this negative impact is driven by changes in college type, heterogeneity in the returns to college, or reductions in labor force experience. Under a variety of conservative assumptions, veterans are unlikely to recoup the reduced earnings experienced in the seven years following separation. Among veterans who were already enrolled in college when the legislation passed, the program raised months of college completed by 2 months, B.A. completion by 1.5 percentage points, and Associates completion by .4 percentage points. The impact on earnings appears to be negative seven years after initial enrollment. The method of payment of benefits (to the school versus individual) impacts veteran’s claiming of educational tax credits and tuition and fee deductions.

How Disability Benefits Affect Veteran Self-Employment

Courtney Coile
,
Wellesley College
Mark Duggan
,
Stanford University
Audrey Guo
,
Santa Clara University

Abstract

The U.S. Department of Veterans Affairs’ Disability Compensation (DC) program provides disability benefits to nearly one in four U.S. military veterans and has annual expenditures of $77 Billion. We examine how the receipt of DC benefits affects the self-employment decisions of veterans, making use of variation in eligibility resulting from a 2001 policy change that increased access to the program for veterans who served with “boots on the ground” in the Vietnam theater but not for other veterans of that service era. We find that the policy-induced increase in program enrollment decreased labor force participation and induced a substantial increase in self-employment. The latter finding suggests that an exogenous increase in income allowed some older veterans to realize an ambition to start their own business or to retire gradually through self-employment. We next explore the characteristics of veteran business owners and the self-employment patterns of service-disabled veterans.

Army Service in the All-Volunteer Era

Kyle Greenberg
,
United States Military Academy-West Point
Matthew Gudgeon
,
United States Military Academy-West Point
Adam Isen
,
U.S. Department of the Treasury
Corbin Miller
,
U.S. Department of the Treasury
Richard Patterson
,
United States Military Academy-West Point

Abstract

The United States has relied exclusively on volunteers to serve in the military since July 1, 1973. Volunteers tend to come from lower income households, yet we know relatively little about whether enlistment improves their prospects. This paper links the universe of Army applicants between 1990 and 2011 to IRS data and exploits eligibility thresholds at the 31st and 50th percentile of the nationally representative Armed Forces Qualifying Test (AFQT) to estimate the long-term, dynamic effects of Army enlistment on earnings, employment, education, and disability. Our regression discontinuity estimates show that Army service increases cumulative earnings in the 15 years following Army application at both cutoffs. We also find that Army service increases college attendance, disability compensation, and marriage rates, with no cumulative effects on employment. Further, we find striking heterogeneity by race, with black servicemembers experiencing large long-term earnings gains.
Discussant(s)
Brigham Frandsen
,
Brigham Young University
Kyle Greenberg
,
United States Military Academy-West Point
Richard Patterson
,
United States Military Academy-West Point
JEL Classifications
  • J0 - General
  • I0 - General