By Li Dai and Pedro Martins
Vocational education is an important and well-established alternative to academic education. In most countries, the number of vocational graduates is now on par with that of academic graduates. In the case of China, there are approximately 11 million students graduating with vocational education qualifications annually, only slightly less than the around 12 million academic graduates per year.
Figure 1. The density of secondary vocational schools in China (More details in the paper)
Another interesting fact about the Chinese vocational system is that vocational education provision is largely subject to regional industrial strategies and distributed unequally across the country (Figure 1). Given the scale and scope of vocational education, our understanding of how labour markets reward vocational qualifications is very limited. In a new discussion paper, Does vocational education pay off in China? Instrumental-variable quantile-regression evidence, we estimate the returns to vocational education in comparison to academic education for secondary education graduates.
The study uses data from the China General Social Survey (CGSS) between 2003 and 2015. In addition to estimating the average effect of vocational education (vis-á-vis academic education) on earnings, the study models how vocational education pays off for individuals with different earnings potential. We also seek to address the fact that individuals choose the optimal amount of education based on a number of factors which may not be readily observed but may also influence earnings.
For those who at most finish secondary education, the study shows that vocational education generates higher earnings than academic education. However, we find that this vocational premium is partly driven by individual selection. After controlling for this, the study finds that the vocational premium comes mostly from individuals with average earnings potential.
In contrast to the prevailing idea in China that vocational education is an inferior alternative to academic education, the evidence suggests that secondary vocational graduates perform at least equally well to secondary academic graduates, and even better in some cases. This evidence may help students, parents and policy makers in their schooling choice decisions.