Can German vocational training combat skill shortages in developing countries? Evidence from dual training system in the Philippines

Abstract

This paper examines the labor market impacts of the Philippine Dual Training System (DTS), a vocational training program that combines firm‐based on‐the‐job training (OJT) and conventional institution‐based training, using a recent survey that tracked graduates from DTS and regular institution‐based programs. The estimation results using fuzzy regression discontinuity design show a significantly positive impact on the most recent monthly earnings. The impact significantly increases with the OJT intensity, measured by the number of hours a week in OJT. The above results imply that vocational training has to be aligned with actual production technologies and work practices to narrow skill gaps and create positive returns.