Technical Education and Skills Development Authority (TESDA) is mandated to promote, coordinate, and administer the DTS as a form of enterprise-based technical and vocational education training (TVET).

Globally, studies demonstrate generally high returns to OJT in private firms.<sup>5</sup> While firm-level (or enterprise-based) training appears critical for industrial development in developing countries, identifying returns to such training is rare in country contexts.<sup>6</sup> Recent studies suggest significant premiums for enterprise-based training, including the DTS, in the Philippines. The employment rate of enterprise-based training graduates has been consistently highest among all training modalities under TESDA.<sup>7</sup> A cost-benefit study found net benefits for firms offering the DTS programs relative to the direct costs incurred from program implementation. The same study also suggested differences in long-term productivity between the DTS-trained workers and non-DTStrained workers.<sup>8</sup> Labor market returns to the DTS are affected by skill gaps in the market as well as the scale of the DTS operation. The share of enrollees and graduates of enterprise-based training programs has remained small, accounting for 3 percent of the total TVET enrollment and graduates, which may represent a suboptimal scale of operation. Earlier studies present mixed conclusions regarding the economic viability of the DTS in the Republic of Korea; after analyzing the economic internal rate of return (EIRR) for Meister High School, the EIRR was found to be no higher than ordinary vocational training programs due to its costly structure.<sup>9</sup> This study summarizes the analysis of labor market returns to the DTS programs by using tracking survey data provided by technical and vocational institutes (TVIs) in the Philippines.<sup>10</sup> This allows for the comparison of labor market outcomes between the DTS and regular program (RP) graduates from the same TVIs. Based on initial results, the EIRR of the DTS is estimated based on the lifetime earning profiles of high school (HS) graduates, vocational training institution graduates, and college graduates in the Philippines.

This report is divided into seven sections. Following the introduction, the second section provides an overview on the Philippine DTS. The third section describes the analytical approach used to estimate the rate of private returns to the DTS and the EIRR. The fourth section details the tracking survey and samples. The fifth and sixth sections examine the results of returns to the DTS and the EIRR, and the seventh section presents the conclusions of the report.

> 5 Bartel 1995; Blundell and Meghir 1996; Booth and Brian 2002; Booth and Zoega 2003; Loewenstein 1998; Loewenstein and Spletzer 1999; Lynch 1992; and Veum 1995.

> 6 Schaffner 2001; Sekkat 2011; Yamauchi and Srianant 2009.

> 7 di Gropello, Tan, and Tandon 2010 and Orbeta 2016.

> 8 Mapa, Almeda, and Abis 2016.

> 9 Lee, Kim, and Kyeong Lee (2016).

> 10 Due to methodological limitations, the survey results are conditional based on graduation from vocational programs. While the dropout rate has remained low, the study did not analyze the characteristics of those who did not graduate.

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