Abstract
Study at a foreign university can be an important way of developing international human capital. We investigate factors affecting international student flows for higher education and their consequences for bilateral market integration in Australia. Estimation results demonstrate that income, cost competitiveness, migration network effects and other education pathways increase the demand for tertiary education. Our results show that university study, inter alia, is an important determinant of bilateral trade between Australia and the student’s home country.
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Notes
Australian Department of Education (2014) reports that 36% of the students who completed ELICOS in 2012 moved eventually to higher education. The corresponding figure for SCHOOL was 38%. Of the international students entering higher education in Australia in 2013, only 10% had previously completed a VET course. These figures reflect quite diverse patterns for students from different sources, however.
An additional hypothesis that we would like to have included relates to the perceived quality of Australian universities relative to their competitors. To test such a hypothesis at this aggregated level requires an index of the relative quality of national university systems. Existing rankings (see Table 1 for example) relate to individual institutions not university systems, and indices based on these rankings produced mixed results in our estimations. Fortunately, their inclusion or exclusion in the regressions had little impact on the other coefficient estimates. It seems unlikely that perceptions of the relative quality of the Australian university system would have changed much over our sample period in any case.
Estimates based on commencements are similar and are also available.
We exclude the data before 2002 because significant changes in the methodology used for International Enrolments Data caused a break in the time series in that year. Likewise in 2011, the Australian Government implemented significant policy changes following a review of student visa requirements and procedures. A student’s nationality is based on citizenship. Overseas students on Australian-funded scholarships or sponsorships or students undertaking study while holding a tourist or other temporary entry visas are excluded, as are New Zealand students as they do not require a student visa to study in Australia.
From the Australian Bureau of Statistics, US Bureau of Labor Statistics and UK Office of National Statistics, respectively
The corresponding increase in UK costs measured in £UK is 58%.
The limited time dimension of our sample precludes us from testing for lag length, etc., so in this dimension, at least our results should be viewed as preliminary.
The GMM, one of the most widely used methods of estimation, provides a solution to endogeneity problems (Wooldridge 2010).
Zheng (2014) finds GDP per capita is negative and significant for non-OECD source countries and positive and significant for OECD source countries, consistent with our estimated non-linear relationship.
2SLS estimation shows qualitatively similar results. The instruments are correlated with the instrumented variable (as confirmed in Table 3) but are uncorrelated with the dependent variables in Table 4. Statistics of pairwise Pearson correlations between the selected instruments and the dependent variable in Eq. (2) are less than 1% (not reported).
The robustness of the instrumental variable estimations was checked by re-estimated using different sets of instruments. Similar results were obtained (available on request).
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Acknowledgements
We appreciate the valuable comments from the three anonymous reviewers and the editor (Hugo Horta) and the three referees from ANZIBA2015: Peter Verhoeven, Adrian Cheung, Y.S. Choi and Ian Austin. We also thank the seminar participants at the Korea Institute for International Economic Policy, Seoul, in 2013 and the participants at the Australia-New Zealand International Business Association (ANZIBA) 2015 conference at Melbourne Business School in 2015 and Global Conference on Business, Economics and Management, Rome, in 2015. The usual disclaimer applies.
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Min, B.S., Falvey, R. International student flows for university education and the bilateral market integration of Australia. High Educ 75, 871–889 (2018). https://doi.org/10.1007/s10734-017-0175-4
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DOI: https://doi.org/10.1007/s10734-017-0175-4