CESifo Working Paper No. 774

the Dynamic Cost of the Draft

Abstract

We propose a dynamic general equilibrium model with human capital
accumulation to evaluate the economic consequences of compulsory services
(such as military draft or social services). Our analysis identifies a so far ignored
dynamic cost arising from distortions in time allocation over the life-cycle. We
provide conservative estimates for the excess burden that arises when the
government relies on forced labor rather than on income taxation to finance public
expenditures. Our results suggest that eliminating the draft could produce
considerable dynamic gains, both in terms of GDP and lifetime utility.

JEL Classification: H20, H57, J22, C68.

Keywords: conscription, draft, time allocation, distortionary taxation, computable
general equilibrium models.

Andreas Wagener

VWL IV, FB 5
University of Siegen
Holderlinstr. 3

57068 Siegen

Germany

[email protected]

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