Conflicting Incentives: Government Financial Aid, Vocational-to-University Track Change and Graduates’ Wages in Chile

Although literature on education economic returns is not un- common, research focusing in vocational students is quite scarce. This paper addresses labor market outcomes of vocational high schools’ students and their trajectories in the two possible paths in the Chilean higher education system: college education or vocational higher education. Using OLS regressions, we find that vocational high school education is associated with higher relative wages compared with students from regular or academic high schools. Moreover, when students follow tertiary education, higher relative wages are expected both for students from vocational and general high schools, specially for the latter. Using a regression discontinuity design (RDD) on two different discontinuity rules in the allocation of financial aid, we found that vocational high school students that continue in vocational higher education have neutral to positive wage impact of pursuing higher education. However, these students face a negative wage impact when they are induced to follow college higher education.