The economics of vocational training : past evidence and future considerations

This paper: (i) presents a partial survey of the literature on the economics of vocational training to draw some lessons for evaluations; and (ii) indicates how much evaluations may be undertaken using data on pay, inputs and outputs. There are three important lessons. First, social, corporate and private returns to vocational training in developing countries appear to be high enough to justify expanding training activity. However, training in industrial institutes and vocational secondary schools is less cost-effective than more informal firm-based training, at least in Kenya, India and Israel. Also, Latin American data indicate that there may be substitutability between schooling and formal institutional vocational training. Second, in some sectors a more labour-intensive method of production is economically more efficient than current methods. Third, sophisticated production function analyses are plagued by statistical and measurement problems. Training can be evaluated using earnings data or output and input data. In all cases there are technical problems. In the face of such problems with earnings data a simpler before/after plant level study of changes in inputs or output associated with training may offer the most tractable evaluation method.