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The fiscal role of conscription in the U.S. World War II effort

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  • Siu, Henry E.

Abstract

An often overlooked role of conscription is as a method of lump sum taxation in times of war. Conscription of military personnel allows the fiscal authority to minimize wartime government expenditure, and hence, minimize tax distortions associated with war finance. This paper presents a simple dynamic general equilibrium model to articulate this view, and calibrates the model to the U.S. World War II experience. Analysis of the calibrated model indicates that the welfare value of conscription as a fiscal policy tool is quantitatively large: despite the fact that the American involvement lasted only four years, conscription is worth approximately 2% of annual aggregate consumption in perpetuity.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 55 (2008)
Issue (Month): 6 (September)
Pages: 1094-1112

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Handle: RePEc:eee:moneco:v:55:y:2008:i:6:p:1094-1112

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Web page: http://www.elsevier.com/locate/inca/505566

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Keywords: Conscription Military draft World War II Optimal policy Ramsey equilibrium;

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Cited by:
  1. Valerie A. Ramey & Neville Francis, 2006. "A Century of Work and Leisure," NBER Working Papers 12264, National Bureau of Economic Research, Inc.
  2. Valerie A. Ramey, 2009. "Identifying Government Spending Shocks: It's All in the Timing," NBER Working Papers 15464, National Bureau of Economic Research, Inc.
  3. Gunji, Hiroshi & Miyazaki, Kenji, 2011. "Estimates of average marginal tax rates on factor incomes in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 25(2), pages 81-106, June.

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