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Risk-return trade-offs to different educational paths: vocational, academic and mixed

Simone Tuor Sartore and Uschi Backes-Gellner

International Journal of Manpower, 2010, vol. 31, issue 5, 495-519

Abstract: Purpose - The purpose of this paper is to investigate the rates of return and the risks of different types of educational paths – all leading to a tertiary educational degree. The paper seeks to distinguish a purely academic educational path from a purely vocational path and a mixed path with loops through both systems. Design/methodology/approach - The paper studies the labor market outcome to compare earnings and calculate net return rates as well as risk measures to investigate whether different educational paths are characterized by different risk-return trade-offs. Entrepreneurs are separated from employees in order to examine whether for the same combination of education the labour market outcomes differ between the two groups. Findings - The empirical results are based on the Swiss Labor Force Survey (SLFS) and demonstrate that mixed educational paths are well rewarded in the labor market. However, for entrepreneurs a high return is also associated with a high income variance. Research limitations/implications - The findings provide evidence for the existence of complementarities between vocational and academic education. Further research on mixed educational paths might provide more insight into this presumed relationship. Practical implications - Since the results indicate that mixed educational paths are a worthwhile strategy, the permeability of a national education system is a very important educational policy issue. Originality/value - The study is innovative in three ways: first, it focuses on complete educational paths and not just the highest educational degree. Second, an alternative measure, the Baldwin rate of return, is used to assess the profitability attached to different educational paths. Third, the income risk associated with each educational path is calculated.

Keywords: Risk management; Education (search for similar items in EconPapers)
Date: 2010
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