Driven Out of Employment? The Impact of the Abolition of National Service on Driving Schools and Aspiring Drivers

Before 1997, compulsory military service was a way for many young French men to obtain their driving licence for free. After the abolition of compulsory conscription in 1997, this sex‐based discrimination disappeared. We use this shock in its two dimensions. First, it was a supply shock, since we show the abolition induced a decline in the fraction of men holding a driving licence, particularly for men living in urban areas. Because the causal relation between holding a driving licence and employment is hard to demonstrate, we use this policy change as an instrument for the former. Some elements of our analysis show that employment and having a driving licence are closely related. However, we cannot fully demonstrate that our results are due to the lack of a driving licence in itself rather than due to other consequences of the abolition of national service (e.g. professional courses or the associated loss of experience). Second, it was a demand shock, since these men were forced to turn to driving schools. Here, we are able to show that the abolition of national service had a direct and uncontroversial effect on the (heavily regulated) driving schools industry. The demand shock resulted in increased rents. These rents translated into an increase in the number of driving schools, stable total employment, a decrease in average employment, no increase of total sales or value‐added, no obvious decrease in profits per school, but an increase in wages paid to the teachers in those cities that had many young men. Hence, those who benefited from increased demand have been the instructors, in limited supply, not the incumbent schools or the consumers.