Sofia Nardandrea (University of Milano-Bicocca)
Simona Comi, Federica Origo and Federico Segato
Despite the increasing interest in the labor market returns to tertiary vocational education (VET), the role of skills effectively acquired remains an understudied topic. In this paper, we use a unique dataset on the universe of students enrolled in tertiary vocational education in a Northern Italian region from 2015 to 2024 to investigate the returns to skills, leveraging cutting-edge LLM techniques. Analyzing program descriptions provided by each VET institution, we identify the skill content of each program by comparing its textual content with structured skill classifications, i.e. European Classification of Skills, Competences, Qualifications, and Occupations (ESCO). Our approach allows us to measure the skill content of each program and to assess the degree of alignment between training curricula and labor market demand. Using this information, we constructed a unique and novel dataset by merging the skills acquired by Tertiary VET students with the national evaluation of the programs (INDIRE) and the graduates employment histories derived from an administrative database (Comunicazioni Obbligatorie, Cob). The empirical analysis examines the impact of VET diplomas on labor market outcomes, including occupational outcomes, earnings, contractual stability and multiple job holding. We estimate the economic returns to three different skill bundles. The findings will provide new evidence on how variation in acquired skills influences labor market opportunities at the beginning of the working career. Overall, the study contributes to the literature in two ways: first, by offering the first evidence on skill-specific returns for Italys tertiary VET graduates; and second, by introducing an innovative LLM-based methodology for extracting and classifying skills from curricula. Our findings indicate that technical and operational skills are associated with higher wages, a higher probability of holding a permanent contract, and a lower probability of multiple job holding, while social/managerial (basic) skills are positively associated with wages. By contrast, social/managerial (applied) skills are negatively associated with wages and contractual stability, while showing only weak evidence of a positive association with employment. These results shed light on the mechanisms through which VET programs generate labor market value and inform the design of more effective, skill-oriented training policies.