Competition in the quality of higher education: the impact of student mobility
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Competition in the quality of higher education: the impact of student mobility Gabrielle Demange1 · Robert Fenge2 · Silke Uebelmesser3
© The Author(s) 2020
Abstract In the last years, there has been a shift toward more private financing of higher education in many countries. At the same time, student mobility has substantially increased. This paper analyzes in a two-region model the impact of student mobility on region-specific higher education quality with private funding. Individuals decide whether and where to study based on their individual ability and the implemented quality. We show that mobility of students affects educational quality in very different ways depending on the probability of return migration. With full return migration, quality is optimally provided which is in stark contrast to the underprovision result in the case of tax financing. On the contrary, low return migration and thus more competition for students countervail the efficient provision of quality and result in too little differentiated levels or too high symmetric levels. This is in line with the overprovision result with tax financing. Keywords Higher education · Migration · Educational quality · Vertical differentiation · Welfare criterion JEL Classification H75 · I28 · R23
An earlier version of the paper has been circulated as Demange and Fenge (2009): “Vertical differentiation in the quality of higher education when students are mobile.” The present paper is a largely revised and extended version. * Silke Uebelmesser silke.uebelmesser@uni‑jena.de 1
Paris School of Economics-EHESS, Paris, France
2
University of Rostock and CESifo, Rostock, Germany
3
Friedrich-Schiller-University Jena and CESifo, Jena, Germany
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G. Demange et al.
1 Introduction During the last few decades, student mobility has substantially increased (OECD 2019). At the same time, more and more mobile students stay on after graduation. Even though the extent of return migration varies considerably across countries and depends on several factors (see, e.g., Lu et al. 2009; Tremblay 2005), there is empirical evidence showing that the fraction of foreign students who stay in their host country upon graduation is substantial (see, e.g., Rosenzweig 2006; Lowell et al. 2007; Van Bouwel and Veugelers 2014). Hence, there seems to be scope for competition for students (and graduates) and many OECD countries are aware of this (Chaloff and Lemaitre 2009). One possible approach is to try to affect the return migration rates. Lowell et al. (2007) report that, for example, the visa application process is a strong policy tool to attract and to keep foreign students. Another option is to aim at directly attracting students. Competition may take many forms and depend critically on various factors such as the probability of return migration after students have graduated and the financing system. In a tax-financed system, the return probability of graduates critically affects the provision of higher education. Governments underinvest in public e
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