Student and Graduate Migration and its Effect on the Financing of Higher Education

The number of tertiary students enrolled outside their home country has almost doubled in the last decade. In higher education systems that are partly tax-funded, a country’s labor force might not be willing to subsidize the education of foreign students who can be expected to work abroad after graduation with high probability. This paper analyzes whether and how student mobility affects the governmental decision about the financial regime of higher education based on aggregated data of 22 OECD countries for the period 2000 to 2010. We find a small but significant positive correlation. Supported by robustness checks, this points into the direction that the larger the share of foreign students among all students in a country, the more a country shifts to private-based funding. We also study other possible determinants. Among others we find that the private financing share of higher education funding depends on a country’s tax revenue, its GDP and the share of students enrolled in private universities.