Veterans face great difficulty in civilian labor market at the time of discharge, evidenced by longer unemployment spells and lower earnings compared to their otherwise similar counterparts. To address the concern of transition difficulty, Transition Assistance Program (TAP) was established in 1991 to ease the process. The program is jointly organized by Department of Defense, Department of Labor and Veteran Affairs. It provides workshops to near-separation service members covering employment assistance, VA benefit briefing, career consult service, and a separate session to meet disabled veterans’ special needs. The goal of this study is to examine the impact of TAP on veteran’s wellbeing.

The data used in this study is pooled CPS veteran supplements of 2001, 2003 and 2005. The main sample analyzed are male veterans between 18 and 64, who separated from military between 1981 and 2000. Veterans were asked retrospectively if they were offered TAP, if they participated, utilization of VA benefits and various aspects of current wellbeing in the labor market.

Based on information from CPS, we trace the pattern of program rollout: both offering and participation increased rapidly since its inception. Of all 6.98 million veterans discharged during the first ten years of the program, 3.72 million (53.3%) were offered TAP and 2.9 million (41.5%) participated. Despite of its large scale in population covered, the effectiveness of TAP has never been empirically examined. This study aims at filling this gap by directly evaluating the effect of TAP on veteran’s labor market outcome and VA benefit utilization.

We start the analysis by graphically plotting unconditional mean of outcome for participants and non-participants. On average, participants of TAP have higher labor market participation rate, are more likely to obtain college education and to claim VA Disability Compensation.

The simple comparison may be an inaccurate estimate of the effect of TAP because participation is voluntary. Veterans who choose to participate in the program may be different in career readiness from those who opt out, leading to biased estimates. To address the issue, we instrument for individual’s participation using whether the program is offered. The validity of the instrument relies on institutional setting of TAP: interagency collaboration inefficiency was documented to cause imperfect offering to eligible individuals. Estimates from IV strategy confirm that the treatment effects shown in graphical analysis are robust to addressing self-selection. The results suggest that TAP is effective in facilitating quality career transition. It also raises awareness and utilization of VA benefits entitled to veterans.

The findings in this study provide policy implication to the upcoming downsizing of the military in the next 4 to 5 years. Moreover, it fits into the broad interest of active labor market program evaluation. The unique setting of TAP adds extra insights: the retrospective information allow us to evaluate long run effect of the program. Also, uniform eligibility of TAP allows exploiting heterogeneous treatment effects on workers with various attributes, as opposed to conventional program only aiming at disadvantaged workers.