Vocational Training Programs and Youth Labor Market Outcomes: Evidence from Nepal

TL;DR

This study evaluates a vocational training program in Nepal, showing it significantly increases youth employment and earnings, especially among women, by enabling home-based self-employment aligned with local norms.

Contribution

It provides causal evidence on the impact of vocational training on youth employment and earnings in Nepal using a regression-discontinuity design.

Findings

10 percentage point increase in non-farm employment for participants

Up to 31 percentage points increase for program compliers

Significant earnings gains, especially among women engaged in home-based self-employment

Abstract

Lack of skills is arguably one of the most important determinants of high levels of unemployment and poverty. In response, policymakers often initiate vocational training programs in effort to enhance skill formation among the youth. Using a regression-discontinuity design, we examine a large youth training intervention in Nepal. We find, twelve months after the start of the training program, that the intervention generated an increase in non-farm employment of 10 percentage points (ITT estimates) and up to 31 percentage points for program compliers (LATE estimates). We also detect sizeable gains in monthly earnings. Women who start self-employment activities inside their homes largely drive these impacts. We argue that low baseline educational levels and non-farm employment levels and Nepal's social and cultural norms towards women drive our large program impacts. Our results suggest that the program enables otherwise underemployed women to earn an income while staying at home - close to household errands and in line with the socio-cultural norms that prevent them from taking up employment outside the house.