How Does a Standardized Curriculum Influence Labor Market Integration of VET Graduates? Evidence from the German Case

Previous research has demonstrated that the institutional characteristics of vocational education and training (VET) programs contribute to inequalities in the early career outcomes of VET graduates. This study extends those findings by exploring the impact of an under-examined institutional characteristic: input standardization, i.e., the extent to which the government dictates what curriculum to be taught in training programs. Specifically, we investigate how input standardization affects the labor market integration of graduates in German dual system, a VET model that combines school-based education with firm-provided training. We hypothesize that a lower level of input standardization in VET programs leads to smoother labor market integration. This is characterized by graduates needing less time to secure their first regular job (lasting at least six months), achieving better job matches, accumulating fewer days of non-employment, and experiencing fewer status changes within the first five years of entering the labor market. This occurs because a less standardized curriculum equips VET graduates with more firm-specific skills which make retaining in the training firm attractive for both VET graduates and training firms. We test the hypothesis using rich administrative data on the employment biography of VET graduates. To account for factors that influenced VET graduates’ selection into training programs, this study employs a difference-in-difference approach to exploit a reform in Germany that gradually decreased the input standardization of training programs by increasing the autonomy of training firms in curriculum selection. This study makes two major contributions. First, it enhances our understanding of the mechanisms that connect the institutional characteristics of education systems to labor market outcomes, with a focus on the school-to-work transition phase for VET graduates. Second, it addresses an important institutional design question by providing insights into how to organize VET systems for optimal labor market integration.