The Impact of Mandatory Military Service. Evidence from Spain

Abstract

Using Spanish administrative records, I study the impact of Military Service (MS) on several labor outcomes for men born between the years 1968 and 1973. To address a concern of endogeneity in MS, a national lottery is used as a source of variation. The results reveal, differently from OLS or Fixed Effects estimates of the impact of MS, that an allocation out of service through the lottery is associated with significant benefits. Firstly, being spared from service increases the probability of being in the labor market (1.6pp), the likelihood of being employed (1.7pp), tenure in the last job (0.15 years) and monthly earnings (1.9pp). Secondly, the effect is not restricted to the years of active service, but for extensive margins (employment and labor force participation), it wears o over the years. However, the impact on some earnings measures is present over the complete period under analysis. Thirdly, I present evidence that avoiding MS through the lottery is associated to an increase in labor market experience (0.2 years) and the likelihood of holding a professional or technical degree (2.8pp). Finally, I explore the heterogeneity across educational levels and whether location of service and military branch affect the size of the penalty.