Subsidies to foreign students and French tuition fees

Higher education is more globalised than ever nowadays. Excellent universities emerge in developing countries and institutions thus face an increasing level of competition to attract the best students from all over the world. At TSE, about half of the students are foreigners. One of the obvious reasons why so many international students seek admission in Toulouse — apart from its reputation and academic motives — is  that France is one of the cheapest places to study among developed countries (see, for instance, OECD data on tuition fees). Tuition fees are relatively low for foreign students, and the state offers many scholarships and grants. While such advantages increase the competitiveness of French universities, is it economically justified to offer foreigners so much public funding? In the same vein, why do most governments provide some funding opportunities to their home students who decide to study abroad?

At first glance, the answer to such questions is not clear-cut. On the one hand, subsidising[1] foreign students attracts the best — future — researchers and foreign workers into the country, which increases the circulation of ideas. For instance, between 2008 and 2012, 45% of foreign graduates in the United States extended their visa in order to work in the metropolitan area where they studied (Ruiz, 2014). In the same spirit, financing home students who study abroad encourages them to apply to top universities, which is profitable for the country if they decide to come back to work in their country of origin. On the other hand, subsidised foreign students might choose to go back to their country of origin, and home students might decide to stay abroad after completing their studies. Hence, one could think that the money invested in such areas is somewhat wasted, and make foreigners pay for their education would be better. In the light of the recent announcement of the “Bienvenue en France” (“Choose France”) policy project, which aims to attract more international students, the rise of tuition fees for non-EU citizens could be based on such argument.

Are international students beneficial for an economy?

It is difficult to measure precisely if a country is a “net winner” of higher education globalisation, but one main topic in the literature is to determine whether admitting more international students leads to crowd-out domestic students. Universities having a limited budget admitting more foreigners might reduce the number of spots available for home students. However, empirical evidence shows the opposite: admitting more international students — especially for graduate programs — has a strong crowd-in effect because universities can collect more tuition fees. In the United States and the United Kingdom, estimates of this effect lie around 0.8, meaning that admitting one more foreign graduate student leads to almost one more domestic student enrolled (Machin and Murphy, 2017; Shih, 2018). This fact may also reflect some intangible benefits of the rapid increase in foreign students’ enrollment in developed countries such as higher exposition to international peers and extension of the domestic students’ network (see Winkler, 1984).

This argument is particularly interesting because it means that attracting more foreign students is a good national policy to favor post-secondary education among the domestic population. Also, as another form of externality, a country that offers substantial subsidies to foreigners might benefit from an easier access of its domestic students to foreign education systems. As an example, most — if not all — countries of the European Union offer lower tuition fees and more scholarship opportunities to EU citizens. In a recent study, an Italian researcher also found a positive link between Latin American students’ enrollment and trade between OECD countries and the students’ country of origin (Murat, 2018).

On the cost side, there is no clear answer to whether the benefits of attracting foreigners offset the costs of financial support offered by the host country. There is only little evidence that subsidising education of foreign students leads to an increase in steady state economic growth (see Bergerhoof et al., 2013). Nonetheless, it seems reasonable to think that there exists somehow a net gain considering that subsidising foreigners is a widely spread practice.

Choose France, but pay more.

On 19th November 2018, French Prime Minister Édouard Philippe announced the new national strategy to attract international students. The policy project aims at giving a boost to the growth of the number of international students, that is lower than in other developed countries who adopted more “offensive policies” in this regard such as Germany, China, and Canada. The controversial policy mostly consists in raising tuition fees of non-EU international students in order to finance more generous scholarships. If the plan is adopted, the annual tuition will increase to 2,770€ at the Bachelor level. At the Master and PhD levels, international students will have to disburse 3,770€ per year. It seems quite counter-intuitive that the government expects to attract more students while also increasing tuition fees. Indeed, the low price of higher education is the comparative advantage of France over North American and some other European countries right now. With only one-quarter of the student population being eligible for some fundings from the government, this increase in tuition fees should crowd-out foreign students. Some African students (who comprise about half of the foreign students population in France) already expressed concerns about whether they would be able to finance their studies if the new policy is implemented.

At TSE, admission committees are well aware of that; in order to keep the competitiveness of the School unchanged, the institution will need to compensate graduate students for this increase. In other words, the new policy will partly consist in simply taking money out of the universities given that at least some institutions will increase scholarships so that their students would not have to bear all the cost of the government’s decision. Without such compensations, it is likely that many students will think twice before seeking admission in France. Therefore, this policy should have two perverse effects that are contrary to the idea behind it: international students’ enrollment should not substantially increase — it might as well decrease — and some of the generated revenues from the government will be extracted from universities’ budget. Apart from taking money from “those who can afford it”— which I doubt —  I do not see how this policy does any good nor encourages students to choose France.

by Sébastien Montpetit

[1] The term “subsidies” will refer to both low tuition fees and availability of scholarships, loans, and grants.


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