Taking versus taxing: an analysis of conscription in a private information economy

Most countries currently man their militaries through conscription (i.e., a draft). Conventional wisdom suggests that, by lowering the budgetary cost of the military, a draft reduces distortionary taxation, especially when military needs are large. We find that this intuition is misguided. When income taxes are set optimally, voluntary enlistments lead to less distortionary taxation than a draft, because the tax base left behind by a volunteer army tends to be more productive than that after a draft. For reasonable parameter values, drafts are more distortionary (and less socially desirable) when military needs are large.