Working Paper: NBER ID: w23950
Authors: Joshua Aizenman; Yothin Jinjarak; Nam Ngo; Ilan Noy
Abstract: Economic integration has brought about not only benefits and opportunities but also required adjustment, especially for the youth entering the labour force. The lower growth rates characterizing the post Global Financial Crisis era and the concerns about income inequality put to the fore the degree that better targeted investment in human capital may ameliorate the challenges facing the working poor. Using cross-country data, we find the association between the income shares of the working poor, dependence on manufacturing sector, and the availability of vocational education. Conditioning on tertiary educational attainment, improved access to better vocational education will probably contribute more than large increase in regular college attainment. Comparing the US to Germany suggests that pushing more students to BA granting colleges may no longer be the most efficient way to deal with the challenges caused by the decline in manufacturing employment affecting in particular lower-income households. We also note that a tracking of technical training and educational budget, shown in the case of Vietnam in comparison to Thailand, as well as government subsidies for reskilling of labour fource throughout their career in Singapore, is a potential explanation for their relative manufacturing competitiveness.
Keywords: Vocational Education; Income Distribution; Manufacturing; Inequality
JEL Codes: F15; F21; F4; F41; F43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improved access to vocational education (I24) | Higher income shares of the working poor (E25) |
| Increased vocational education (J24) | Decreased income inequality (D31) |
| Larger manufacturing sector (L60) | Amplified benefits of vocational education in narrowing income inequality (I24) |
| Access to vocational education (I24) | Decreased income share of the top 10% (E25) |