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Estimating the Veteran Effect with Endogenous Schooling When Instruments Are Potentially Weak

  • Chaudhuri, Saraswata


    (University of North Carolina, Chapel Hill)

  • Rose, Elaina


    (University of Washington)

Instrumental variables estimates of the effect of military service on subsequent civilian earnings either omit schooling or treat it as exogenous. In a more general setting that also allows for the treatment of schooling as endogenous, we estimate the veteran effect for men who were born between 1944 and 1952 and thus reached draft age during the Vietnam era. We apply a variety of state-of-the-art econometric techniques to gauge the sensitivity of the estimates to the treatment of schooling. We find a significant veteran penalty.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4203.

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Length: 30 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4203
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  1. Angrist, Joshua D, 1990. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records," American Economic Review, American Economic Association, vol. 80(3), pages 313-36, June.
  2. John Shea, 1997. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 348-352, May.
  3. Sherwin Rosen & Paul Taubman, 1982. "Changes in Life-Cycle Earnings: What Do Social Security Data Show?," Journal of Human Resources, University of Wisconsin Press, vol. 17(3), pages 321-338.
  4. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  5. De Tray, Dennis, 1982. "Veteran Status as a Screening Device," American Economic Review, American Economic Association, vol. 72(1), pages 133-42, March.
  6. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
  7. 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.
  8. Kleibergen, Frank & Mavroeidis, Sophocles, 2009. "Weak Instrument Robust Tests in GMM and the New Keynesian Phillips Curve," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(3), pages 293-311.
  9. Saul Schwartz, 1986. "The relative earnings of Vietnam and Korean-era veterans," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 39(4), pages 564-572, July.
  10. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  11. Kenneth I. Wolpin & Mark R. Rosenzweig, 2000. "Natural "Natural Experiments" in Economics," Journal of Economic Literature, American Economic Association, vol. 38(4), pages 827-874, December.
  12. 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.
  13. Joshua D. Angrist & Stacey H. Chen, 2009. "Long-Term Economic Consequences of Vietnam-Era Conscription: Schooling, Experience and Earnings," Royal Holloway, University of London: Discussion Papers in Economics 09/02, Department of Economics, Royal Holloway University of London.
  14. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  15. James H. Stock & Jonathan Wright, 2000. "GMM with Weak Identification," Econometrica, Econometric Society, vol. 68(5), pages 1055-1096, September.
  16. Frank Kleibergen, 2005. "Testing Parameters in GMM Without Assuming that They Are Identified," Econometrica, Econometric Society, vol. 73(4), pages 1103-1123, 07.
  17. Matthew S. Goldberg & John T. Warner, 1987. "Military Experience, Civilian Experience, and the Earnings of Veterans," Journal of Human Resources, University of Wisconsin Press, vol. 22(1), pages 61-81.
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