Working Paper: NBER ID: w23006
Authors: Courtney Coile; Mark Duggan; Audrey Guo
Abstract: The U.S. Department of Veterans Affairs Disability Compensation (DC) program provides disability benefits to nearly one in five military veterans in the US and its annual expenditures exceed $60 billion. We examine how the receipt of DC benefits affects the employment decisions of older veterans. We make use of variation in program eligibility resulting from a 2001 policy change that increased access to the program for Vietnam veterans who served with “boots on the ground” in the Vietnam theater but not for other veterans of that same era. We find that the policy-induced increase in program enrollment decreased labor force participation and induced a substantially larger switch from wage employment to self-employment. This latter finding suggests that an exogenous increase in income spurred many older veterans to start their own businesses. Additionally, we estimate that one in four veterans who entered the DC program due to this policy change left the labor force, estimates in the same range as those from recent studies of the Social Security Disability Insurance (SSDI) program.
Keywords: Disability Compensation; Veterans Employment; Labor Force Participation; Self-Employment
JEL Codes: J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 2001 policy change that expanded access to DC benefits for BOG Vietnam veterans (I28) | decrease in labor force participation among BOG veterans (J26) |
| receipt of DC benefits (H55) | decrease in labor force participation (J21) |
| 2001 policy change that expanded access to DC benefits for BOG Vietnam veterans (I28) | increase in probability of self-employment (J23) |
| 2001 policy change that expanded access to DC benefits for BOG Vietnam veterans (I28) | decrease in likelihood of working for others (J29) |
| increase in income from DC benefits (J32) | incentivized veterans to pursue self-employment rather than traditional wage employment (J68) |
| policy-induced increase in program enrollment (H53) | significant implications for labor supply and employment choices among older veterans (J26) |