Did You Serve? New Evidence on the Causal Effect of Conscription on Wage in Germany

Abstract

Using German administrative data, I identify the causal effect of conscription on men’s early career wage. My quasi-experimental design exploits a discontinuity in the probability of having served induced by the school start cutoff in connection with the suspension of conscription in 2011. Comparing men born in a narrow window around the cutoff, I find that conscription has a positive effect on wage for men of high educational background. Falsification tests using men and women of different birth years show that the effect is unique to men for whom the school start cutoff induces a discontinuity in the probability of having served. I test several mechanisms: draft avoidance behavior and the selection into broad occupational sectors do not explain my result. Rather, conscription causes men to select into jobs requiring more teamwork, which are on average higher-paying. In connection with qualitative survey evidence of the literature, my results suggest that men under conscription acquire social skills. The results imply that students pursuing academic education would benefit from more exposure to team settings, especially at a stage before decisions about tertiary education are made.