Returns to formal and informal vocational education and training in India

Abstract

PurposeIn the process of school-to-work transition, the role of general education and vocational education and training (VET) remains quite central. Based on the human capital theory, we estimate whether investment in VET brings additional returns for workers across the age cohorts.Design/methodology/approachThe focus of our study being the labour market in India, the data from the Periodic Labour Force Survey 2018–19, conducted by the National Statistical Office, has been used for analysis. We have applied the ordinary least square method with sample selection correction, the quasi-experimental technique of propensity score matching and heteroskedasticity based instrumental variable approach to estimate the returns with respect to no VET, formal VET and informal VET.FindingsOur study shows that workers with formal VET earn higher wages than workers with no VET or informal VET. The study finds that workers with informal VET do not earn higher wages than workers with no VET. Moreover, from the age cohort analysis, we have deduced that wage advantage of workers with formal VET persists across all age cohorts and, in fact, accentuates with an increase in age.Originality/valueWe have estimated that VET being complemented with basic general education fetches higher returns in the labour market, especially when provided through formal channels. Moreover, to the best of our knowledge, in the case of developing countries where informal VET is widely provided, this is one of the first studies that captures the return to informal VET. Lastly, complementing the existing studies on the developed countries, we have estimated the returns to VET over the life cycle of the workers.

Determinants of school to work transition and COVID-19

“…Similarly, Bahl et al . (2022) estimate the return to formal and informal vocational education and training (VET) in the school-to-work transition in India.…”

“…Similarly, Bahl et al (2022) estimate the return to formal and informal vocational education and training (VET) in the school-to-work transition in India. Based on human capital theory, they employed empirical analysis to analyze the effect of investment in VET impact on returns for workers in different age groups.…”

Do different types of vocational education and training programmes influence earnings? Recent evidence from India

“…Agrawal and Agrawal (2017) applied the standard earnings function to compare the returns to general secondary schooling and VET and found higher returns to VET at the secondary level. Bahl et al (2021) estimated returns with respect to no VET, formal VET and informal VET and found higher wages for workers with formal VET than workers with no VET or informal VET. Bairagya (2021) found that vocational training has a positive and statistically significant impact on female labour force participation in India.…”

“…In India, a high unemployment rate was found among VET graduates (World Bank, 2008; Agrawal, 2012; Ahmed, 2016); however, wages for VET were found to be higher as compared to general education graduates (Agrawal, 2012; Ahmed, 2016; Ahmed and Chattopadhyay, 2016; Agrawal and Agrawal, 2017). The formal VET complemented with higher education was associated with higher wages (Bahl et al. , 2021) in the overall economy and in primary and secondary sectors (Kumar et al.…”

Wage inequality, Urbanization and In(formalization) in India

“…The choice of exclusion variable is supported by the past literature (Agrawal, 2012;Buchinsky, 2002), which favors using family characteristics as an appropriate exclusion variable for the choice of an economic activity. For the second participation equation (2.2), we include hereditary vocational training as our exclusion variable, which is used by the past studies (see, for example, Bahl & Sharma, 2021;Bahl et al, 2022). The participation equations are estimated with their respective exclusion variables along with human capital and demographic variables.…”