Higher Education

, Volume 74, Issue 4, pp 717–734 | Cite as

Cost economies in the provision of higher education for international students: Australian evidence

  • Liang-Cheng ZhangEmail author
  • Andrew C. Worthington
  • Mingyan Hu


In the past few decades, the additional revenues available via higher education exports (through both relatively higher prices and increased enrolments) have attracted the attention of providers in many developed countries, not least in Anglophone countries like the USA, the UK, Canada and Australia. However, while the revenue case is strong, the institutional cost structures underlying the provision of higher education services for international students remain relatively unknown at the sector level. Accordingly, we offer a comprehensive analysis of the cost economies underlying higher education provision for international students using a sample of 37 Australian public universities over the period from 2003 to 2012. The findings suggest that it is appealing to enrol additional overseas students given their lower average and marginal costs and the significant economies of scale prevailing in higher education generally. Further, while we find evidence of economies of scope for overseas students only in smaller institutions, there is no evidence of diseconomies of scope, implying the current number of overseas students and their joint production with domestic students at the least does not lead to unnecessarily higher overall costs.


Australia Economies of scale Economies of scope International education Higher education 


  1. ABS. (2001). Australian standard classification of education (ASCED), 2001. Retrieved from
  2. ABS (2015a). Balance of payments and international investment position, Australia, Dec 2014. Belconnen, ACT: Australian Bureau of Statistics.Google Scholar
  3. ABS. (2015b). Consumer price index inflation calculator. Retrieved from
  4. Agasisti, T., & Johnes, G. (2015). Efficiency, costs, rankings and heterogeneity: the case of US higher education. Stud High Educ, 40(1), 60–82.CrossRefGoogle Scholar
  5. Aina, C. (2013). Parental background and university dropout in Italy. High Educ, 65(4), 437–456.CrossRefGoogle Scholar
  6. Australian Government. (2014). Research snapshot: transnational education in the higher education sector. Retrieved from
  7. Australian Government. (2015a). Draft national strategy for international education: for consultation. Retrieved from
  8. Australian Government. (2015b). International students studying science, technology, engineering and mathematics (STEM) in Australian higher education institutions. Retrieved from
  9. Australian Government. (n.d.). Support services for students. Retrieved from
  10. Baty, F., Ritz, C., Charles, S., Brutsche, M., Flandrois, J.-P., & Delignette-Muller, M.-L. (2015). A toolbox for nonlinear regression in R: the package nlstools. J Stat Softw, 66(5), 1–21.CrossRefGoogle Scholar
  11. Baumol, W. J., Panzar, J. C., & Willig, R. D. (1982). Contestable markets and the theory of industry structure. New York, NY: Harcourt Brace Jovanovich.Google Scholar
  12. Blaug, M. (1981). The economic costs and benefits of overseas students. In P. Williams (Ed.), The overseas student question: studies for a policy (pp. 47–90). Bedford Square, London: Heinemann Educational Books Ltd..Google Scholar
  13. Chishti, S. (1984). Economic costs and benefits of educating foreign students in the United States. Res High Educ, 21(4), 397–414.CrossRefGoogle Scholar
  14. Cohn, E., Rhine, S., & Santos, M. (1989). Institutions of higher education as multi-product firms: economies of scale and scope. Rev Econ Stat, 71(2), 284–290.CrossRefGoogle Scholar
  15. Delgado, M. S., Parmeter, C. F., Hartarska, V., & Mersland, R. (2015). Should all microfinance institutions mobilize microsavings? Evidence from economies of scope. Empir Econ, 48(1), 193–225.CrossRefGoogle Scholar
  16. DFAT (2015). Trade in services Australia 2013–14. Barton, ACT: Department of Foreign Affairs and Trade.Google Scholar
  17. Four Corners. (2015). Degree of deception. Retrieved from
  18. Greer, M. L. (2003). Can rural electric cooperatives survive in a restructured US electric market? An empirical analysis. Energy Econ, 25(5), 487–508.CrossRefGoogle Scholar
  19. Greer, M. L. (2008). A test of vertical economies for non-vertically integrated firms: the case of rural electric cooperatives. Energy Econ, 30(3), 679–687.CrossRefGoogle Scholar
  20. Greer, M. L. (2010). Electricity cost modelling calculations. Burlington, MA: Academic.Google Scholar
  21. Heaton, C., & Throsby, D. (1998). Benefit-cost analysis of foreign student flows from developing countries: the case of postgraduate education. Econ Educ Rev, 17(2), 117–126.CrossRefGoogle Scholar
  22. Hoenack, S. A., & Davidson, C. T. (1987). University marginal instructional costs: implications for charges to overseas students. Econ Educ Rev, 6(4), 345–355.CrossRefGoogle Scholar
  23. Hoenack, S. A., Weiler, W. C., Goodman, R. D., & Pierro, D. J. (1986). The marginal costs of instruction. Res High Educ, 24(4), 335–417.CrossRefGoogle Scholar
  24. Ilieva, R., Beck, K., & Waterstone, B. (2014). Towards sustainable internationalisation of higher education. High Educ, 68(6), 875–889.CrossRefGoogle Scholar
  25. Izadi, H., Johnes, G., Oskrochi, R., & Crouchley, R. (2002). Stochastic frontier estimation of a CES cost function: the case of higher education in Britain. Econ Educ Rev, 21(1), 63–71.CrossRefGoogle Scholar
  26. Johnes, G. (1996). Multi-product cost functions and the funding of tuition in UK universities. Applied Economics Letters, 3(9), 557-561. doi:10.1080/135048596355943CrossRefGoogle Scholar
  27. Johnes, G. (1997). Costs and industrial structure in contemporary British higher education. Econ J, 107(442), 727–737.CrossRefGoogle Scholar
  28. Johnes, G. (1998). The costs of multi-product organizations and the heuristic evaluation of industrial structure. Socio-Economic Planning Sciences, 32(3), 199-209. doi:10.1016/S0038-0121(97)00035-9CrossRefGoogle Scholar
  29. Johnes, G., & Johnes, J. (2009). Higher education institutions’ costs and efficiency: taking the decomposition a further step. Econ Educ Rev, 28(1), 107–113.CrossRefGoogle Scholar
  30. Johnes, G., & Schwarzenberger, A. (2011). Differences in cost structure and the evaluation of efficiency: the case of German universities. Educ Econ, 19(5), 487–499.CrossRefGoogle Scholar
  31. Knight, J. (2013). The changing landscape of higher education internationalization: for better or worse? Perspective: Policy and Practice in Higher Education, 17(3), 84–90.Google Scholar
  32. Knight, J., & de Wit, H. (1995). Strategies for internationalisation of higher education: historical and conceptual perspectives. In H. de Wit (Ed.), Strategies for the internationalisation of higher education: a comparative study of Australia, Canada and the United States of America (pp. 5–32). Amsterdam: European Association for International Education.Google Scholar
  33. Li, F., & Chen, X. (2012). Economies of scope in distance education: the case of Chinese research universities. The International Review of Research in Open and Distributed Learning, 13(3), 117–131.CrossRefGoogle Scholar
  34. Longlong, H., Fengliang, L., & Weifang, M. (2009). Multi-product total cost functions for higher education: the case of Chinese research universities. Econ Educ Rev, 28(4), 505–511.CrossRefGoogle Scholar
  35. Martínez-Budría, E., Jara-Díaz, S., & Ramos-Real, F. J. (2003). Adapting productivity theory to the quadratic cost function: an application to the Spanish electric sector. J Prod Anal, 20(2), 213–229.CrossRefGoogle Scholar
  36. Mayo, J. W. (1984). Multiproduct monopoly, regulation, and firm costs. South Econ J, 51(1), 208–218.CrossRefGoogle Scholar
  37. OECD (2014). Education at a glance 2014. Paris: OECD publishing.CrossRefGoogle Scholar
  38. Park, J. (2004). International student flows and R&D spillovers. Econ Lett, 82(3), 315–320.CrossRefGoogle Scholar
  39. Petersen, M. A. (2009). Estimating standard errors in finance panel data sets: comparing approaches. Rev Financ Stud, 22(1), 435–480.CrossRefGoogle Scholar
  40. Throsby, C. D. (1991). The financial impact of foreign student enrolments. High Educ, 21(3), 351–358.CrossRefGoogle Scholar
  41. Triebs, T., Saal, D. S., Arocena, P., & Kumbhakar, S. C. (2016). Estimating economies of scale and scope with flexible technology. J Prod Anal, 45(2), 173–186.CrossRefGoogle Scholar
  42. Winkler, D. R. (1984a). The costs and benefits of foreign students in United States higher education. Journal of Public Policy, 4(2), 115–138.CrossRefGoogle Scholar
  43. Winkler, D. R. (1984b). The fiscal consequences of foreign students in public higher education: a case study of California. Econ Educ Rev, 3(2), 141–154.CrossRefGoogle Scholar
  44. Worthington, A. C., & Higgs, H. (2011). Economies of scale and scope in Australian higher education. High Educ, 61(4), 387–414.CrossRefGoogle Scholar
  45. Zhang, L.-C., & Worthington, A. C. (2015). Evaluating the accuracy of scope economies: comparisons among delta method, bootstrap, and Bayesian approach. Paper presented at Australian Conference of Economists PhD Colloquium. Retrieved from
  46. Zhang, L.-C., & Worthington, A. C. (2016). Scale and scope economies of distance education in Australian universities. Studies in Higher Education Advance online publication doi:  10.1080/03075079.2015.1126817.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  1. 1.Department of Accounting, Finance and Economics, Griffith Business SchoolGriffith UniversityNathanAustralia
  2. 2.School of Humanities, Languages and Social SciencesGriffith UniversityNathanAustralia

Personalised recommendations