The consequence of educational reform on youth employment: evidence from an enrollment increase in vocational training in Ethiopia

Increasing access to basic-level industrial education in developing economies and its quality improvement are important for the industrialization of low-income countries. It may also have an impact on individual labor market outcomes in industrial and entrepreneurial work. An increase in the labor supply by introduction of a new cohort also induces over-crowding due to competition between the new and old cohorts, which have received different types of basic-level industrial education. This paper examines the impacts of an educational expansion on youth labor market outcomes, exploiting an Ethiopian reform in technical and vocational educational training toward competency-based training, which expects to foster human capital through the adoption of a new curriculum and removes information asymmetry through public certification of skill levels. This paper tests whether improvements in human capital and information for a new cohort can overcome the problems of crowded labor markets arising due to the educational expansion. Large-scale and nation-wide administrative data suggest that the industrial education reform decreased the likelihood of employment in permanent, formal, or full-time jobs for the new cohort due to an increase in competition with old cohorts. This effect of large enrollment increase in vocational training pushes young people in general, and males in particular, to choose self-employment. The data also indicates that an industrial education expansion has a lasting negative effect only for women working in permanent, formal, or full-time jobs. Overall, an expansion in vocational training has more negative impacts for young women than for young men.