provided health insurance and pensions in the previous or current year (including
codes of 0 for those not employed) and δt is a full set of year dummies while ζs is
a full set of state dummies and ζst is a state-specific time trend. State dummies
and year dummies account for heterogeneity in veteran take-up by state and time;
this heterogeneity could be caused by local economic conditions making the
program more attractive or variation in the degree to which the program was
publicized to veterans in different regions. A state-specific time trend accounts
for factors varying within states linearly over time in some specifications.
Because the propensity for separating from the labor force will vary with benefits
offered, we include indicators for employer-provided health insurance coverage
and inclusion in a pension plan in the previous year in some specifications.
Standard errors are adjusted for non-independence of the errors within the
veteran*year group.
D. Identification assumptions
In a difference-in-differences model, in order to interpret the results
causally, specific assumptions must be satisfied. In our quasi-experimental setup,
it must be true that: (1) wives of veterans and non-veterans are reasonably similar
before the healthcare expansion, (2) only veterans are affected by the VA
expansion, (3) no other shocks occur during this time period that differentially
14
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