Competition for the International Pool of Talent

Developed countries increasingly compete for a pool of talented students from developing countries. This competition brings host countries to vertically differentiate their education programmes: some countries offer higher education quality and charge high tuition fees, while others provide a lower quality for lower tuition fees. This paper argues that the education quality of high-quality countries, the tuition fees, and the quality and tuition fee differential between the countries increase, as the income prospects for graduates in the developing countries catch up with the developed world and the number of international students grows. If foreign students become more likely to stay in their host country after graduation, the implications will be more ambiguous. In particular, an increase in educational quality can be accompanied by a decline in tuition fees. Intensified competition for international students does not necessarily disadvantage developing countries, since they might even benefit from a brain gain.