We also find that exiting the military in a period of high unemployment
affects veteran’s marital status and living arrangements. Our
estimations indicate that 1 percentage-point increase in the
unemployment rate in the year of exit from active service leads to a 1.8
percentage-points reduction in the probability of ever being
married, to a 1.3 percentage-points increase in the probability of
divorce, and to a 2 percentage-point reduction in the probability of
living in a couple household. In these models, the effect sizes are
quite similar in the OLS and 2SLS models, suggesting that the decision
to marry may be less influenced by the unemployment rate than the
decision to attend college. We note that previous investigation on the
effect of entering the labor market during weak economic conditions have
neglected to study its effect on marriage and living arrangements.
However, our findings are supported by findings in the recent study by
Autor, Dorn and Hanson (2017) that links the decline in the prevalence
of marriage among young adults to reduced labor-market opportunities
faced by males, which make them less valuable as marital partners. It is
interesting to note that veterans in our sample who enter the labor
market in poor conditions are more likely than others to obtain
post-secondary education; this should increase their potential earnings
(and thus, their value as partners); nonetheless we find that they are
still somewhat less likely to marry. It is possible that some
individuals put off marriage in the face of initially negative labor
market conditions; if those same individuals obtain additional
education, doing so may further delay marriage and this temporal effect
could explain at least part of the decreased rates of marriage.
To summarize, our analyses indicate that initial labor market conditions
do impact other outcomes. Veterans who enter the civilian labor market
during periods of relatively high unemployment achieve more
post-secondary education than others (perhaps due to lower opportunity
costs), but are less likely to marry and less likely to live in a
coupled household.
In the next subsections, we investigate the effect of reentering the
civilian life in years of high unemployment on earnings, wealth and
retirement decisions. In these analyses, we do not control for education
attainment, marital status or coupled status because (as just shown)
they are also affected by the notional experiment at hand. Moreover,
they are important determinants of earnings, wealth and retirement
decisions. Thus, controlling for education, marital status and coupled
status would bias our estimates of the average total effect of
reentering the civilian life in periods of high unemployment. In other
words, in this case education attainment, marital status and couple
status are cases of “bad controls” (Angrist and Pischke,
2008).11Our methodology somewhat resembles that of Neal and
Johnson (1996) who argue that controlling for educational attainment
introduces endogeneity into wage regressions that are designed to
measure discrimination. Instead, they opt to include only AFQT scores
from the teen years and exclude educational attainment and other
measures of skills; they interpret their results as a measure of the
large role of premarket discrimination in labor market outcomes. The
combination of the unemployment rate at the point veterans enter the
civilian labor market and their educational attainment at that point
could be viewed as a measure of their initial allotment of skills and
luck. However, we do use the 2SLS methodology (discussed above) for
correcting for endogeneity of veteran status.