Yesterday’s model for tomorrow’s economy? Dual VET and wage inequality in the knowledge economy

Abstract

Dual vocational education and training (VET) is said to have positive economic effects. However, recent contributions suggest that the rise of the knowledge economy may undermine these positive effects because university-educated workers are better suited for the new knowledge-intensive jobs. This paper provides the first evidence on the relationship between dual VET and wage inequality in mature knowledge economies. Using a new dataset on 37 advanced economies from 1996 to 2020, we find that dual VET is associated with lower levels of wage inequality. This negative association is particularly strong in the lower half of the wage distribution, which suggests that academically weaker students are the main beneficiaries of dual VET. Using three different indicators of the knowledge economy, we find, contrary to the fears often espoused in the literature, no clear evidence that the knowledge economy erodes this negative association between dual VET and wage inequality.