General education versus vocational training: Evidence from an economy in transition

Abstract: Vocational training and general education are the two predominant forms of secondary schooling around the world. Most studies that compare the effect of vocational and general education on labor market outcomes in the cross-section suffer from selection bias since less able students are more likely to enroll in vocational programs. To avoid the bias caused by non-random selection, this paper exploits a 1973 educational reform in Romania that shifted a large proportion of students from vocational training to general education while keeping total years of schooling unchanged. Using data from the 1992 Census and the 1995-2000 LSMS, we analyze the effect of this policy in the context of a transition economy that experienced a decline in manufacturing and a reallocation of labor to new jobs. We find that men in cohorts affected by the policy were significantly less likely to work in manual or craft-related occupations but showed no differences in unemployment, non employment, family income or wages as compared to their counterparts who were not affected by the policy. However, there is evidence that men affected by the policy were more likely to marry and less likely to remain single or divorce. We therefore conclude that the cross-sectional differences in labor market returns between graduates of vocational and general schools are largely driven by selection but that there are returns to general education in the marriage market.