Vocational Education and Employment Outcomes in Ethiopia: Displacement Effects in Local Labor Markets

Discussion Papers

No.678

by Takahiro Fukunishi ,Tomohiro Machikita

October 2017

ABSTRACT

Vocational education has been identified as an important policy domain to address youth unemployment in low-income countries, but empirical evidence is scarce. This paper estimates the effects of vocational education on employment outcomes in Ethiopia, where institutional reform has been implemented for the last decade. Compared to workers with secondary general education, IV estimates of effects on the probability of workers with entry-level vocational education having full-time work, permanent jobs, and formal jobs are not significantly positive. We also find that when the proportion of workers with vocational education increases and the number of training institutes in a local labor market is added, workers with lower-secondary education are less likely to have either a permanent job or a formal job. The estimate indicates that a 10% increase in graduates of vocational education reduces the probability of having a formal job by 4.9% for males. This supports the presence of displacement effects of expansion of vocational education on less educated workers. Though effects are currently small, further expansion of vocational education may cause more adverse welfare impacts on less educated workers.

Keywords: Vocational education, Employment, Displacement effects, Youth, Ethiopia
JEL classification: I25, J13, J24

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