Policy initiatives, self-sorting, and labor market effects of tertiary education for adult workers

We investigate the differences in labor market effects between a regular tertiary degree and a tertiary degree obtained while working a job. Using multiple-year data that span the drastic policy initiatives targeting on-job education in China, we find significantly lower returns to an on-job degree compared to a regular degree at the bachelor's and graduate levels, but no significant differences at the junior college level. However, when applying the correlated random coefficient model with heterogeneous returns, the estimated gaps from the conventional model disappeared in earlier years and reversed their signs in later years in general. We find that the results are affected by the extent of workers’ self-sorting into on-job schooling based on unobserved heterogeneity and anticipated future returns. Policies that change the returns to on-job degrees for specific workers can create different incentives and thus may alter the nature of self-selection for adult workers when pursuing education at work.