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The Effect of Veterans Benefits on Veterans' Education and Earnings

  • Joshua D. Angrist

The majority of armed forces veterans make use of the subsidized training and educational benefits provided by the Department of Veterans Affairs. The effect of veterans benefits on educational attainment am civilian earnings is estimated here using the Census Bureau's 1987 Survey of Veterans. Two identification strategies are employed to control for unobserved characteristics that are correlated with educational attainment and benefit usage. First, a fixed effects strategy is implemented by exploiting information on educational attainment at the time of entry to service. Second, instrumental variables estimates are computed, where the excluded instruments are interactions between period of service am educational attainment at entry to service. The effect of veterans benefits on earnings is estimated by decomposing the return to education into a return to the grade completed at entry to service and a return to the post-entry grade increment. Veterans benefits are estimated to increase schooling by roughly 1.4 years and the grade increment is worth roughly 4.3 percent, so that veterans benefits raise annual earnings by approximately 6 percent. This premium appears to accrue primarily to the 77 percent of benefit users who attended college or graduate school.

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File URL: http://www.nber.org/papers/w3492.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3492.

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Date of creation: Oct 1990
Date of revision:
Publication status: published as Industrial and Labor Relations, July 1993
Handle: RePEc:nbr:nberwo:3492
Note: LS
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  1. Joshua Angrist & Alan Krueger, 1989. "Why Do World War II Veterans Earn More Than Nonveterans?," Working Papers 634, Princeton University, Department of Economics, Industrial Relations Section..
  2. David Card & Alan Krueger, 1990. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," NBER Working Papers 3358, National Bureau of Economic Research, Inc.
  3. Heckman, James J. & Robb, Richard Jr., 1985. "Alternative methods for evaluating the impact of interventions : An overview," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 239-267.
  4. Stephen L. Mangum & David E. Ball, 1989. "The transferability of military-provided occupational training in the post-draft era," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 42(2), pages 230-245, January.
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