The Cold War and the U.S. Labor Market

Ilyana Kuziemko, Donato A. Onorato and Suresh Naidu

No 35008, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We argue that the Cold War contributed to the inclusive growth of the post-war decades. On the labor-demand side, we isolate exogenous shifts in military procurement across states and firms. We show that military procurement increases manufacturing employment and reduces inequality. Overall, the 1950s-to-1990s decline in defense production explains roughly one-quarter of the decline in manufacturing employment and nearly one-tenth of the rise of top-ten income share. On the labor-supply side, the Cold-War-era draft removed millions of young men from the labor force, significantly reducing young male civilian unemployment. Military procurement also increased voter support for hawkish foreign policy.

JEL-codes: J01 N42 (search for similar items in EconPapers)
Date: 2026-03
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