CAN SERVING THOSE WHO SERVED BACKFIRE? LABOR SUPPLY EFFECTS OF THE VA DISABILITY COMPENSATION BY NATIVITY

Abstract

This paper examines the effect of the 2001 Agent Orange policy expansion on the labor supply of Vietnam-era veterans, with a focus on differences by immigration status. Using the Veterans Supplement to the Current Population Survey (VETCPS) from 1990 to 2025, I employ a difference-in-differences strategy comparing veterans who served "boots on the ground" (BOG) in the Vietnam theater against those who did not (NOG). The analysis extends prior work by Coile et al. (2021) by incorporating nearly a decade of additional data and by separately estimating effects for immigrant and non-immigrant (U.S. born) veterans. For the full sample, I find that BOG veterans exhibited a gradual increase in labor force non-participation following the policy expansion, peaking at 5.7 percentage points in 2014–2017, a period when the average veteran had just surpassed the full retirement age of 65. After 2018, this effect dissipates and becomes statistically insignificant, consistent with nearly all veterans as they fully transitioned out of the labor force by their mid-seventies. Effects on the intensive margin, usual weekly hours worked, were statistically insignificant across all periods. Subsample analysis reveals that non-immigrant veterans drove these results, while immigrant veterans showed no statistically significant labor supply response on either margin, though limited sample size constrains inference for this group. These findings highlight the long-run behavioral consequences of targeted disability programs and their interaction with broader social insurance systems.