All or Nothing? The Consequences of Tertiary Education Non-Completion in Croatia and Serbia

An expansion in tertiary education participation implies that a growing share of youth cohorts is to drop out of the tertiary education system without graduating. This article explores the effects of tertiary education dropout on the early labour market careers of youths in Croatia and Serbia. Theoretically, the article deduces the expected outcomes of dropping out based on the mechanisms postulated within the human capital, signalling, and credentialist theories. It then elaborates how prominence of any given mechanism within any given country should be conditional on the institutional set up of employment systems. Our country choice is driven by the similarity of two countries’ education systems and their diverging labour market trajectories, allowing for cautious inferences about institutional effects. Empirically, we estimate the propensity of young people to enter, persist in, and complete tertiary education, net of socio-demographic background, and study characteristics. We observe several labour market outcomes across these three comparisons. Our results largely support the predictions of education being used as a signal in Croatia, the country with predominantly internal labour markets. In Serbia, a country with pronounced external labour markets, the outcomes are closer to the productive skills understanding of education