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Estimating the Payoff to Schooling Using the Vietnam-era Draft Lottery

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  • Joshua Angrist
  • Alan Krueger

Abstract

Between 1970 and 1973 priority for military service was randomly assigned to draft-age men in a series of lotteries. Many men who were at risk of being drafted managed to avoid military service by enrolling in school and obtaining an educational deferment This paper uses the draft lottery as a natural experiment to estimate the return to education and the veteran premium. Estimates are based on special extracts of the Current Population Survey for 1979and 1981-85. The results suggest that an extra year of schooling acquired in response to the lottery is associated with6.6 percent higher weekly earnings. This figure is about 10 percent higher than the OLS estimate of the return to education in this sample, which suggests there is omitted-variable bias in conventional estimates of the return to education. Our findings are robust to a variety of assumptions about the effect of veteran status on earnings.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 670.

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Date of creation: Aug 1991
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Handle: RePEc:pri:indrel:dsp01cf95jb47d

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Keywords: education; ability; earnings;

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References

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  1. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  2. Mark C. Berger & Barry T. Hirsch, 1983. "The Civilian Earnings Experience of Vietnam - Era Veterans," Journal of Human Resources, University of Wisconsin Press, vol. 18(4), pages 455-479.
  3. Joshua D. Angrist & Alan B. Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," NBER Working Papers 3572, National Bureau of Economic Research, Inc.
  4. McKinley L. Blackburn & David Neumark, 1991. "Omitted-Ability Bias and the Increase in the Return to Schooling," NBER Working Papers 3693, National Bureau of Economic Research, Inc.
  5. Joshua D. Angrist, 1990. "The Draft Lottery and Voluntary Enlistment in the Vietnam Era," NBER Working Papers 3514, National Bureau of Economic Research, Inc.
  6. Ashenfelter, Orley & Krueger, Alan B, 1994. "Estimates of the Economic Returns to Schooling from a New Sample of Twins," American Economic Review, American Economic Association, vol. 84(5), pages 1157-73, December.
  7. Weiss, Yoram, 1971. "Ability and the Investment in Schooling: A Theoretical Note on J. Mincer's 'Distribution of Labor Income'," Journal of Economic Literature, American Economic Association, vol. 9(2), pages 459-61, June.
  8. Joshua Angrist, 1989. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records," Working Papers 631, Princeton University, Department of Economics, Industrial Relations Section..
  9. De Tray, Dennis, 1982. "Veteran Status as a Screening Device," American Economic Review, American Economic Association, vol. 72(1), pages 133-42, March.
  10. Angrist, Joshua & Krueger, Alan B, 1994. "Why Do World War II Veterans Earn More Than Nonveterans?," Journal of Labor Economics, University of Chicago Press, vol. 12(1), pages 74-97, January.
  11. repec:fth:prinin:304 is not listed on IDEAS
  12. Hungerford, Thomas & Solon, Gary, 1987. "Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 175-77, February.
  13. Jon R. Crane & David A. Wise, 1987. "Military Service and Civilian Earnings of Youths," NBER Chapters, in: Public Sector Payrolls, pages 119-146 National Bureau of Economic Research, Inc.
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