Peer Effects in Vocational Education and Training

Vocational Education and Training (VET) programs are prevalent in a European context, but often struggle with drop-out rates that exceed those of general upper-secondary education. Using Danish administrative data, we study the effects of reform-induced reductions in shares of VET students who did not pass their lower secondary final exams on passing GPA VET students. We find that passing students have a higher probability of remaining enrolled in VET after the first year of studies when entering a VET school with a higher share of below-passing peers. Studying outside options, we find that students become less likely to drop out of education entirely. The results are consistent with models of peer effects in which particularly unmotivated students become points of comparison for their peers, increasing their motivation and likelihood of remaining enrolled.