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Why Do World War II Veterans Earn More Than Nonveterans?

Author

Listed:
  • Joshua Angrist

    (Princeton University)

  • Alan B. Krueger

    (Princeton University and NBER)

Abstract

Veterans of World War II are widely believed to earn more than nonveterans of the same age. Theoretical justifications for the World War II veteran premium include the subsidization of education and training, and preference for veterans in hiring. In this paper, we propose and test an alternative view: that the observed World War II veteran premium reflects the fact that men with higher earnings potential were more likely to have been selected into the Armed Forces. An empirical strategy is developed that allows estimation of the effects of veteran status while controlling for correlation with unobserved earnings potential. The estimation is based on the fact that from 1942 to 1947 priority for conscription was determined in chronological order of birth. Information on individuals' dates of birth may therefore be used to construct instruments for veteran status. Empirical results from the 1960, 1970, and 1980 Censuses, along with two other micro data sets, support a conclusion that World War II veterans earn no more than comparable nonveterans, and may well earn less. These results suggest that OLS estimates of the World War II veteran premium are severely biased by nonrandom selection into military service, and that the civilian labor market experiences of veterans of World War II were not very different from the experiences of Vietnam-era veterans.

Suggested Citation

  • Joshua Angrist & Alan B. Krueger, 1989. "Why Do World War II Veterans Earn More Than Nonveterans?," Working Papers 634, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:254
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    veteran; World War II; two stage least squares; selectivity bias;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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