The effect of combat exposure on financial problems

Abstract

This paper examines whether combat exposure leads to financial problems among surviving deployed veterans. We use restricted panel data for the years 2001 through 2016 from 64,508 deployed Millennium Cohort Study participants, and we accommodate real-world uncertainty with an information theoretic, semi-parametric Generalized Maximum Entropy model. The average predicted probability of developing a new major financial problem (such as bankruptcy) and greater financial distress increases 0.44 percentage points (21 percent relative to the mean probability) following a single combat exposure and increases 0.90 percentage points (43 percent relative to the mean probability) following multiple combat exposures. Simulation results identify policy-relevant characteristics to target before a veteran deploys. The results point toward veterans with poorer pre-deployment mental or physical health, veterans in enlisted ranks, and veterans between the ages of 26 and 36 as being less resilient to the effects of combat exposure on financial problems.