Evaluating the Cost of Conscription in The Netherlands

In this article we investigate the effect of military service in the Netherlands on future earnings. Estimating the cost or benefit of military service is complicated by the complex selection that determines who eventually serves in the military: On the one hand, potential conscripts have to pass medical and psychological examinations before entering the military, and on the other hand numerous (temporary) exemptions exist that can be manipulated by young men to avoid military service. We use substantial, policy-induced variation in aggregate military enrollment rates to deal with these selection issues. We find that approximately 10 years after serving in the military former conscripts have earnings that are on average 5% lower than the earnings of members of their birth cohort who did not serve in the military. These findings are shown to be robust against a variety of specifications.