School-Based Vocational Education and the Employment--Education Trade-off: Evidence from Peers' Choices

Vocational education and training (VET) may accelerate entry into the labour market while reducing participation in further education. We quantify this trade-off in the context of a school-based vocational system. We draw on administrative data linked to a post-secondary survey for five cohorts in Portugal. We exploit the institutional structure of the educational system to address self-selection. Identification leverages leave-out variation in the share of lower-secondary classmates who subsequently choose VET. We find a pronounced trade-off in early post-school transitions for students whose track choices respond to those of their peer choices: vocational enrolment increases employment by 26-34 percentage points and improves several job quality indicators; on the other hand, VET reduces further education participation by 30-40 percentage points. VET is also associated with higher NEET incidence, an effect that appears to reflect earlier exposure to unemployment rather than inactivity during the school-to-work transition. Additional analyses suggest important heterogeneity across VET school types and fields of specialisation, with smoother transitions in (publicly funded) private VET schools, and engineering-related fields.