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The growth of international students and economic development: friends


or foes?
Nick Adnetta
a
Institute for Education Policy Research, Staffordshire University Business School, Stoke-on-Trent, UK

Online publication date: 06 October 2010

To cite this Article Adnett, Nick(2010) 'The growth of international students and economic development: friends or foes?',
Journal of Education Policy, 25: 5, 625 — 637
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Journal of Education Policy
Vol. 25, No. 5, September 2010, 625–637

The growth of international students and economic development:


friends or foes?
Nick Adnett*

Institute for Education Policy Research, Staffordshire University Business School, Leek Road,
Stoke-on-Trent ST4 2DF, UK
(Received 21 August 2009; final version received 13 March 2010)
Taylor and Francis
TEDP_A_478804.sgm

Journal
10.1080/02680931003782827
0268-0939
Original
Taylor
502010
25
n.j.adnett@staffs.ac.uk
NickAdnett
00000September
&ofArticle
Francis
Education
(print)/1464-5106
2010
Policy (online)
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In recent years there has been a significant growth in the number of international
students. In several developed countries the inflow of foreign tertiary students has
become a significant source of income for higher education (HE) providers and the
economy as a whole. This net inflow of foreign students has been indirectly and,
more recently, directly encouraged by government policies in these countries.
However, this ‘trade’ in HE is unbalanced, with low-income countries being
significant net ‘importers’ of HE. Here we review the theoretical and empirical
literature to reassess the impact of this growth of international students on the
extent and pattern of global income inequality. We conclude that the benefits from
the growth of trade in HE accrue predominantly to developed countries, with the
costs being disproportionately borne by the poorest countries. Analysis is
presented explaining why national and pan-national policies are unlikely to rectify
this imbalance.
Keywords: international students; brain drain; internationalisation of higher
education; education and economic development

Introduction
In 2007 over three million tertiary education students were enrolled outside their
country of citizenship, the numbers of such students having approximately doubled
every 20 years since 1975 (OECD 2009). France, Germany, the UK and the USA
receive nearly half of these foreign students, with most developing and transitional
countries being significant net suppliers of students, and hence, being ‘net importers’
of higher education (HE). In recent decades the national and pan-national policies of
the developed countries have increasingly and actively promoted the expansion and
internationalisation of education, especially HE. In turn, the net sending countries
have usually supported or acquiesced in these policies, since returning students are
viewed as enhancing domestic human capital stocks, whilst any associated temporary
emigration has become a favoured means of ensuring the short-term sustainability of
their current account deficits through increased remittances.
This unbalanced trade in HE reallocates global income and has significant
resource costs for low-income countries. Bashir (2007) calculates that the annual
‘exports’ from the five leading hosts of international HE students in 2005 exceeded
their annual commitment of multi-lateral and bilateral aid for HE by a factor of 10. At
the same time, the values of the HE imports of transitional and developing countries

*Email: n.j.adnett@staffs.ac.uk

ISSN 0268-0939 print/ISSN 1464-5106 online


© 2010 Taylor & Francis
DOI: 10.1080/02680931003782827
http://www.informaworld.com
626 N. Adnett

were large relative to their domestic public expenditure on HE. India, for example,
spent $3.1 billion on HE imports in 2004, that is 0.46% of its GDP and equivalent to
about 80% of its domestic public expenditure on HE. In the case of Indonesia, its
imports exceeded its domestic public spending on HE (Bashir 2007).
Few commentators, apart from Karpur and McHale (2005), have expressed
concern about this rapid increase in the net flow of HE students from developing to
developed countries. Here we review the theoretical and empirical literature to answer
a question largely ignored by the education policy community: whether this expansion
of international students is increasing or reducing global economic inequality. Since
almost 90% of international students, those studying in a country other than that of
their normal residence, are enrolled in HE (Vincent-Lancrin 2008) in answering this
question, we concentrate solely on this sector of educational trade.
This paper is divided into five further sections. In the following section we briefly
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review the current global economic context and identify some of the relevant charac-
teristics of the global knowledge economy. The main part of this section summarises
the nature and size of the current international flows of HE students, concentrating on
the net outflow of HE students from developing countries, and identifies some of their
key features. In the following section we introduce two major issues related to the
question whether this unbalanced expansion of international students is beneficial to
global economic growth and the reduction of global income inequality: the increasing
significance of a country’s human capital stock for its economic development and
the possibility of a brain drain from developing countries. In the fourth section we
examine these two issues from the perspective of developed countries and identify the
attractions for them of achieving a net inflow of HE students. In this section we
explore the prevalence in developed countries of either passive or, increasingly, active
‘beggar thy (poor) neighbour’ policies to attract and retain international students. In
the fifth section we consider the consequences of these large student flows from the
perspectives of HE policy in the net sending countries. Here we concentrate upon
surveying the evidence on the ways in which these flows encourage or discourage the
economic development of these countries. In the concluding section we bring together
the arguments of the previous sections to consider the net effects of the current pattern
of international student mobility on global economic convergence. We explain the
forces sustaining ‘beggar thy neighbour’ policies in developed economies and those
which preclude unilateral action and limit the prospects of effective multi-lateral
reforms through the General Agreement on Trade in Services (GATS) process. We
conclude with an illustration of the sort of policy package which could produce a more
even and equitable sharing of the net benefits of international trade in HE.

The internationalisation of HE and the knowledge-based economy


Since the eighteenth century the expansion of international trade has been championed
by economists and policy-makers as the main instrument for promoting economic
development. In contrast to this previous emphasis on international flows of goods,
services and capital, the current rapid expansion and internationalisation of education
has raised the possibility that increased human capital mobility, and the associated
acceleration of knowledge transfer, could become a key factor in promoting economic
development in future decades.
The development of the global knowledge-based economy has been associated
with persistent high private and public economic returns to HE, notwithstanding the
Journal of Education Policy 627

rapid expansion of the latter. Recent technological progress appears to be education


and skill-biased and this change in the relative demand for educated labour has seen
large and persisting premiums for such workers in both developed (Machin 2004;
Jones and Romer 2009) and developing countries (Goldberg and Pavcnik 2007). One
consequence has been a rapid growth in the demand for HE, with globally the number
of students enrolled in institutions of HE increasing from 29 million in 1970 to over
150 million in 2007, with a particularly rapid growth of participation of females in
middle-income countries (Altbach, Reisberg, and Rumbley 2009; UNESCO 2009). In
conjunction with this process of globalisation, the general trend towards more freely
circulating goods, services and capital together with more open labour markets, has
encouraged increased trade in educational provision. Bashir (2007) points out that this
trade, the consumption for payment of HE services of one country (the ‘exporting
country’ in the terminology of the balance of payments accounts) by the nationals of
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another (the ‘importing country’), is a relatively recent phenomenon. Previously


international collaboration in HE largely took the form of faculty exchanges and the
provision of scholarships for international study financed by aid or inter-university
collaborations in research.
Since 2000 the number of foreign tertiary students has been growing at an annual
average of 7.5% (OECD 2009). Currently two-thirds of these approximately three
million foreign HE students are located in just eight OECD countries: USA (20% of
total), UK (11%), Germany (9%), France (8%), Australia (7%), Canada (4%), Japan
(4%) and New Zealand (2%). Together the total value of HE exports of five of these
leading countries (data are not available for France, Germany and Japan) accounted
for $28 billion in 2005 (Bashir 2007). Table 1 provides some more detailed data for
the five leading hosts of foreign students and for the OECD as a whole. We note, from
Column 3, that these five leading providers have recently been losing market share as
foreign enrolments have been growing more rapidly in other OECD countries. Of
additional interest is the much higher proportion of foreign students in advanced
research programmes in HE (Column 4), with the USA attracting about 40% of the
international doctoral researchers and the UK 15% (Kemp et al. 2008).

Table 1. Foreign studentsa in tertiary education: selected OECD countries 2007.


Foreign Index of change: Foreign enrolments Percentage of Percentage of
enrolments as number of as a percentage of foreign foreign
a percentage foreign students, enrolments: students (total students (total
of all tertiary total tertiary advanced research tertiary) from tertiary) from
Destination enrolments (2000 = 100) programmes Africab Asiab
All OECD 8.7 235 20.4 10.5 46.8
Australia 22.5 200 31.5 3.2 79.7
France 11.3 180 37.9 43.8 19.7
Germany 11.3 138 m 8.6 31.2
UK 19.5 158 46.0 9.5 46.3
USAc 3.4 125 23.7 6.1 65.2
a
Foreign students are defined as non-citizens of the country where they study. bFor Australia, Germany, UK
and the USA, these are percentage of international students defined as non-residents of the country where
they study. cFigures for the USA refer to international students.
Note: m is missing data.
Source: Extracted from Tables C2.1 and C2.2 OECD (2009).
628 N. Adnett

The data presented in Table 1 also illustrate the different geographical composition
of foreign students in these leading HE exporters (Columns 5 and 6). The main
importers of HE are the countries of Asia, the Middle East and the Caribbean, with an
emerging trend of mobile students tending to stay in their region of origin and with
China alone accounting for almost 420,000 students abroad (Motivans 2009). Bashir
(2007) points out that although the countries of sub-Sahara Africa lag behind
the former regions, they still account for 7% students studying abroad (excluding
intra-EU flows). These African countries send more students to study outside of their
home country than Latin America, the EU-15 (again excluding intra-EU flows) and
the countries of North America. In relative terms it is the small developing countries
(such as Belize, Djibouti and Tonga) and some larger African countries (e.g., Angola,
Malawi and Zimbabwe) which tend to have the highest proportion of their tertiary
level students studying abroad (Vincent-Lancrin 2008).
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The internationalisation of businesses, as Healey (2008) points out, typically


follows a four-stage process: exporting, licensing production, joint ventures and sole
ventures. A broadly similar course of development can be identified in HE. Although
our discussion above has so far concentrated on the first stage of this process, many
Australian and British universities have participated in the later stages, initially
typically through franchising agreements with local private colleges (Bennell and
Pearce 2003). In Malaysia and Singapore, and more recently in China, there have been
substantial developments of offshore production facilities, though national regulations
concerning the licensing of education providers usually require the involvement of
local partners. These joint ventures have again primarily involved universities from
English-speaking countries, though as Altbach (2004) explains, US universities have
been less active after an abortive entry rush into Japan in the 1990s. Overall, Bashir
(2007) estimates that the total number of students studying in foreign collaboration
programmes is about 500,000, or just over 20% of the number of students studying
abroad (ignoring intra-EU students).

Is the net outflow of HE students from developing countries beneficial?


It is a common historical experience that the expansion of trade leads to specialisa-
tion and conventional economic analysis views specialisation on the basis of
comparative advantage as generally benevolent. However, this growing imbalance of
trade in HE raises two main concerns in the context of a target of reducing global
income inequality. Firstly, this expansion coincides with a period in which the
educational attainment of a country’s workforce has been commonly viewed as a
critical determinant of its international competitiveness and growth potential. More
specifically, the depth and quality of a country’s HE system has been viewed as a
key determinant of the economy’s ability to invent and exploit new products and
production methods. For example, in the EU’s Lisbon strategy, the development of
the European higher education area, now involving 40 countries and with an empha-
sis upon increasing intra-EU student mobility, was given a predominant role.
Notwithstanding the popularity of the championing of HE in nurturing and sustain-
ing the modern knowledge-based economy, the empirical evidence in support
remains rather fragile. Economists have found it difficult to uncover robust evidence
that measures of a country’s human capital stock or flows, including those for HE,
make a significant contribution to the explanation of cross-country differences in
growth (Stevens and Weale 2004; Pritchett 2006). However, both Bloom, Canning,
Journal of Education Policy 629

and Chan (2005) and Gyimah-Brempong, Paddison, and Mitiku (2006) report results
suggesting a strong causal relationship between the growth of HE human capital and
economic development amongst African countries. Indeed, Bloom, Canning, and
Chan suggest that increasing Sub-Saharan Africa’s stock of tertiary education by one
year would increase output by 0.63 points a year through faster technological catch-
up with the developed economies. According to these findings, if the increasing
tendency for less developed economies to ‘import’ HE threatens the growth of their
own HE system, then these countries’ growth potential may be reduced. The pros-
pects of such an outcome give rise to the possibility that there may be an ‘infant
industry’ argument for temporary protection of the HE sectors of developing
countries against foreign competition.
One distinguishing characteristic of trade in HE is that it is disproportionately the
children of the political and economic elite in less developed economies who ‘import’
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foreign education. As a consequence, this may reduce domestic pressures for quality
improvements, and the availability of additional public funding, for the indigenous HE
system. In support of this argument we note the growth in the proportion of interna-
tional students who are self-funded as recorded by Bashir (2007) and Spilimbergo’s
(2009) calculation; in 1990, 57% of the leaders of the 113 countries investigated had
been educated abroad.
The second concern is that the unbalanced expansion of international education
may contribute to an increase in the brain drain from less developed to more advanced
economies. Data from the OECD suggest that African and Caribbean countries suffer
the greatest brain drain with, for example, over 80% of Jamaican and Guyanese
graduates now living in an OECD country and over 70% of those from Guinea-Bissau
(OECD 2005). The importance of the contribution of international education to this
brain drain largely depends upon two relationships. Firstly, the extent to which
international education is a stepping stone to permanent migration to the advanced
economies amongst students from less developed economies. As we show below,
there is evidence that international study is associated with a significantly increased
probability of permanent migration to the host country. Secondly, it depends on the
net effect of such migration on the development of the human capital stock, and hence
on the growth potential, of the less developed economies. Here again there is evidence
of detrimental effects on developing countries, though as we explain below, this
relationship appears to be a complex one.
With these two concerns in mind we now address the policies pursued regarding
international trade in HE in both the net host and net sending countries, starting with
the former.

Why have developed countries encouraged the growth of international students?


The global expansion of HE has been seen as a threat to the continued economic
and technological dominance of the most developed economies (Adams 2009).
Freeman (2010) reports that various American businesses and interest groups have
pointed to the growth of overseas HE, and the faster overseas expansion of science
and technology graduates in particular, as a risk to the US national competitiveness
and even national security. The argument being that in part US competitiveness has
been built upon its ability to attract, and then retain, high-ability international
students. In 1970 the USA accounted for about 6% of the global population but
nearly 30% of the world’s HE students, nearly 40 years later this share has fallen by
630 N. Adnett

nearly two-thirds. Freeman (2010) explains that because the US higher educational
system is the world leader, in the short and medium term it benefits from the world-
wide increased supply of students, through both an increased demand for post-grad-
uate studies in the USA and increasing competition for faculty positions in US
universities. Indeed in 2006, nearly half of all PhD’s in science and engineering
awarded by US universities were to foreign-born students.
Those countries, such as the USA, that have become significant net exporters of
educational provision enjoy more than just balance of payments benefits, there are
positive spillover effects from such exports. Not only does the country gain addi-
tional fee and subsistence revenue from such students, a high proportion of the
successful international students are likely to remain after completing their studies.
Such immigrants sustain the developed countries’ competitive advantage in high-
tech and university-educated workforce-intensive sectors of the economy. In many
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OECD countries the rapid expansion of HE, together with a rise in the relative
costs of its provision, created a funding problem which governments have been
unwilling to resolve through additional public funding (Adnett 2006; Healey 2008).
Whilst initially governments in developed countries were largely passive in the face
of the growing demand for international education, many resource-starved HE insti-
tutions (HEIs) saw the recruitment of a growing number of ‘full-fee’ foreign
students as a means of cross-subsidising what were perceived to be their under-
resourced teaching and research activities. By 2006–2007, international students in
public universities were paying higher tuition fees than domestic students in most
of the main net host countries, France, Germany and Japan being exceptions
(OECD 2009). Whilst HEIs faced some adjustment costs in providing for a more
culturally and linguistically diverse student body, the financial benefits proved
increasingly attractive.
It was only recently, as Bashir (2007) and the OECD (2009) recount, that the
growth of the knowledge-based economy and increasing global competition encour-
aged governments in Australasia, North America and Europe to target the recruit-
ment of foreign students as part of a broader strategy to promote the selective
immigration of skilled workers. In Europe, the ageing of the domestic workforce
has been a further factor stimulating these policies. Hence, policy under economic
liberalism evolved from laissez-faire, where the government tolerated or only indi-
rectly encouraged individual HEIs to diversify their income through recruiting
high-fee international students to one in which such outcomes were central to the
government’s economic strategy. Australia provides a good example of how a
package of complementary policies was developed as part of the government’s
wider economic strategy. With its low population density and high demand for
educated labour, Australia has for the last decade encouraged international students
to study, both on- and off-shore, in its universities. At the same time it has given
increased weighting in its immigration regulations to those applicants with qualifi-
cations from an Australian university (Healey 2008). As a consequence, it now has
the highest proportion of international students amongst its HE enrolments (Table
1, Column 2) and in recent years almost half of those admitted under Australia’s
skilled migration programme hold an Australian degree (OECD 2006). Similarly,
the USA allows foreign students to stay for a year after completion of their studies,
giving them the opportunity to find local long-term employment, a strategy which
the UK has recently followed. Lowell, Findley, and Stewart (2004) calculated that
only about 50% of international students in the USA returned home after complet-
Journal of Education Policy 631

ing their programme. Freeman (2010) reports that nearly 60% of all foreign-born
science and engineering workers in the USA obtained their degrees in that country,
with the staying-on rate being higher for those from lower-income countries.
Similarly, Finn (2007) found that nearly two-thirds of foreign-born PhD graduates
from American universities were still working in the USA 10 years later, though
fears have been raised that the rapid economic growth of China and India now
threaten a reverse brain drain (Wadhwa 2009). Similar, but smaller, effects of
studying abroad have been found in studies of the EU’s Erasmus programme, with
location choices being ‘sticky’ in the sense that mobile students tend to have a
relatively high probability of returning to work to the region where they studied
(Parey and Waldinger 2008).
The immigration of large numbers of highly educated workers strengthens these
developed countries’ comparative advantage in high-tech and university workforce-
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intensive sectors. Chellaraj, Maskus, and Mattoo (2008) find that international
graduate students have a significant and positive impact on the rate of innovation in
the USA as measured by the number of patents. In turn, this innovation is largely
driving technological improvements which have themselves been the major cause
of US productivity growth in recent years. Chellaraj, Maskus, and Mattoo estimate
that these effects were greater than those resulting from direct skilled immigration.
The immigration of international students also has a significant positive effect on
government’s budgets in developed economies, since the highly educated pay
higher taxes and are likely to receive less government benefits than less-educated
residents.
Competitive success in the global knowledge economy requires developed
economies to gain, over time, a comparative advantage in their stocks of human capi-
tal. As a consequence, and in the absence of any global policies or constraints, explicit
policies to attract and retain high-quality international students have now become a
key element of many developed countries’ economic strategies. In essence, these are
‘beggar thy neighbour’ policies since one country’s stock of human capital is
increased at the cost of a reduction in another country’s stock. More specifically,
given the net flows of international students from poor to rich countries, we can label
such policies as ‘beggar thy (poor) neighbour’. However, the presentation of these
policies externally is very different, with an emphasis upon educational provision
rather than the retention of international students. Indeed arguments in support of
these policies have been incorporated into developed economies rhetoric championing
free trade, providing a new emphasis on the desirability of services trade liberalisa-
tion. The developed world’s effective spokesman, the OECD, identifies no fundamen-
tal conflict of interest between the rich countries, which are the net-providers, and the
less-developed countries, the net-importers of HE provision, seeing only advantages
from the current imbalance:

The internationalisation of tertiary education … can also provide an opportunity for …


less developed educational systems to improve the cost efficiency of their education
provision. Indeed, training opportunities abroad may constitute a cost-efficient alterna-
tive to national provision and allow counties to focus limited resources on educational
programmes for which economies of scale can be generated, or to expand participation
in tertiary education despite bottlenecks in provision. (OECD 2008, 350)

In the following section we assess the attractiveness of this ‘opportunity’ from the
perspectives of the less developed countries.
632 N. Adnett

Economic development and the internationalisation of HE


Globally the percentage of the age cohort enrolled in tertiary education has grown
from 19% in 2000 to 26% in 2007 with the highest growth in middle- and high-income
countries. However, as Altbach, Reisberg and Rumbley (2009) record, in low-income
countries, the growth over the same period has been marginal, from 5% to just 7% of
the age cohort. As developing countries have been falling further behind in terms of
HE participation, they have also seen a reallocation of the aid they receive for this
sector. Currently exports of HE are about eight times larger than the official develop-
ment assistance for education as a whole. Of the latter, about a third is accounted for
by post-secondary education and of this 98% is in the form of bi-lateral aid, with
France, Germany and Japan accounting for 80% of the latter in 2004 (Bashir 2007).
In turn much of this funding is for scholarships for students from the aid-receiving
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country for study in the donor country. Effectively this is, as Bashir argues, ‘tied aid’
where imports have to be purchased from the donating country and as such, to the
extent that the fees exceed marginal costs, it effectively represents a subsidy from tax-
payers in donor countries to their domestic HE providers through intermediaries: the
foreign students. Unlike much of the education aid in earlier decades, this recent
growth in bilateral aid does nothing to stimulate capacity-building in the recipient
country and indeed, as we discuss below, may harm it.
The growth of scholarship and of self-funded international students does
potentially create a ‘free-rider’ benefit for the governments of developing countries in
so far that they do not have to fund the costs of this HE. However, this only represents
a potential benefit to these countries if these students return after their studies abroad.
It also comes at the cost of the domestic HE sector having less incentive to raise their
relative performance and less ability to do so as they lose their most able students
and both current and prospective academic staff (Dessy and Rambeloma 2009). Ijim-
Agbor (2009) provides a description of just such a process in Nigerian HE.
We have so far concentrated upon international students and their contribution to
a brain drain, but this ignores several recent contributions which suggest that ‘brain
gain migration’ could raise the overall numbers of educated workers in developing
countries (Commander, Kangasnieni, and Winters (2004) provide a review of this
literature). Recently, Docquier and Rapoport (2008) have investigated this possibility,
namely that the higher emigration prospects of educated workers in developing coun-
tries can raise the expected returns to human capital investment and hence increase the
demand for domestic education in these countries. Their results suggest that develop-
ing countries combining relatively low levels of human capital and low skilled
emigration rates might indeed experience a net brain gain, but that the converse is
likely for those with the opposite characteristics. Their results indicate that the net
brain drain may be extremely detrimental in Central America (especially the
Caribbean), the Pacific region and to a less extent in Sub-Saharan Africa, with much
of Asia and South America experiencing relatively smaller net gains. These results
from their simulations are consistent with our argument above that the net effects of a
growing number of international students is likely to harm the poorest developing
countries, given the strong positive correlations between migration intentions, interna-
tional study and actual migration. Additionally, Brzozowski (2007) finds evidence of
a negative net brain effect in transitional countries and points out that many educated
emigrants from developing and transitional countries end up in unskilled employment
in developed economies (see also Chiswick and Miller 2009). This ‘brain waste’ is
Journal of Education Policy 633

doubly harmful to developing countries. Firstly, the source country’s human capital
stock diminishes and, secondly, because the economic returns to HE study fall, it also
diminishes incentives for future cohorts to enter and complete HE in these countries.
International students are both academically and socially selected: the average cost
of tuition and living expenses at a US state university is something like eight times the
per capita income of China (Marginson 2006). Hence, to the extent that such self-
funding students gain a higher return than those studying at domestic universities and
remit some of their income to their families at home, income inequality in developing
countries is further increased.
The costs identified above of sourcing international students borne by developing
countries will be reduced to the extent to which the: incidence of emigration is limited,
the length of emigration is reduced and emigrants retain ties with their families and
communities in their country of origin. In addition, remittances from those that do
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emigrate may provide new funding sources for investment in human and physical
capital and hence reduce credit constraints in these countries. However, whilst remit-
tances have been found to have poverty-alleviating and consumption-smoothing
effects, there is little evidence that they promote economic growth in developing
countries (Barajas et al. 2009).

Conclusions and policy implications


Overall, it is likely that the global economy benefits from an expansion of HE through
acceleration in the generation, and speed of transfer, of new knowledge. As a conse-
quence, productivity should grow faster and the relative price of goods and services
should fall, hence raising material living standards. However, our arguments above
suggest that the increasing internationalisation of education is one factor contributing
to the unequal division of these benefits across countries. To the extent that the net
import of highly educated students from less developed economies sustains the North–
South model of trade, the North will maintain its supremacy in high-tech and
university-graduate-intensive sectors. It will also be able to maintain a relatively
high price for these goods and services relative to the prices of the labour and
resource-intensive products of the South.
The process of globalisation has increased the intensity of competition between the
developed economies of the North and focussed that competition is on education-
intensive products and services. This process has increased the attractions to each
individual developed economy of importing and retaining high-quality students.
Moreover, these forces which in developed economies have induced ‘beggar thy
(poor) neighbour’ policies towards international students make it unlikely that any
single developed country would voluntarily abandon these policies. In the absence of
reciprocation, the other developed economies who continue importing international
students would gain a further competitive advantage by ‘cream-skimming’ those
students displaced from the unilateral reformer: the brain drain is not halted, but
merely redirected. This ‘first mover disadvantage’ makes remedial unilateral govern-
ment action in developed economies both ineffective and unlikely. At the same time,
the developing countries have very limited abilities to address this issue through their
domestic policies (Gribble 2008) and little bargaining power in multi-lateral negotia-
tions. In the absence of incentives for a policy reversal by developed countries at
national level, we investigate the possibility that pan-national policies could raise the
quality of HE in developing countries. Specifically, we consider two policy areas: the
634 N. Adnett

GATS process and the possibility of reversing recent changes in the composition of
educational aid packages. Whilst we approach this issue from the perspective of
reducing global inequality, we recognise the constraint that feasible policy proposals
need to offer the possibility of net benefits to both developing and developed
countries.
One possible response is for developing countries to try to increase the quality of
their domestic HEIs through encouragement of collaborations with quality providers
in developed economies. The British Council’s HE links, which funds research and
teaching partnerships between UK HEIs and institutions in developing countries,
provides an example of such a scheme. Research suggests that there are many
obstacles to successful collaboration (Stephens 2009). At the same time the growth of
franchising and joint ventures have raised concerns about their overall impact on the
development of HE systems in low-income countries. Indigenous public HEIs are
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typically poorly funded and poorly placed to compete with foreign providers offering
internationally recognised qualifications. Low-income countries are also likely to
have weak quality assurance processes and domestic students are unlikely to be able
to accurately identify the quality of provision and hence police that quality. Fears
concerning the ability of domestic regulators to enforce desired national norms have
strengthened many developing countries resistance to further liberalising reforms in
the GATS negotiations (Hoekman, Mattoo, and Sapir 2007). A resistance, in the case
of HE, further strengthened by the position of most Australian, British and New
Zealand universities, which are ‘public sector’ at home but operate as commercial
ventures abroad, and the absence of any international agreement on what represents a
trade-distorting subsidy in services (Bashir 2007).
In recent years developing countries have in general shown much greater opposi-
tion to the increased presence of foreign education providers than to the growth of
international students which, as we have seen, is the largest element of international
trade in HE. This resistance may be counter-productive and is one cause of the lack of
progress in the negotiations on further reductions in trade barriers. The OECD (2007)
sees GATS as a vehicle for improving the investment climate for foreign providers of
HE to help increase domestic capacity in tertiary education. Whilst it is possible that
freer and expanded international trade in education could promote economic conver-
gence and assist capacity building in developing countries, this is possible only when
the local infrastructure is sufficiently developed. As Marginson argues, only then can
national systems ‘maximise “brain return”, make effective use of foreign-trained
nationals and act as a magnet for diasporic investment’ (2006, 35). Qatar, Singapore
and the United Arab Emigrates are examples of countries following such a path,
recruiting high-ranking foreign universities to establish local campuses with the objec-
tive of not only increasing domestic capacity but also creating ‘hubs’ for their local
regions (Altbach, Reisberg, and Rumbley 2009). However, this is not an option
available to the poorer countries of Sub-Sahara Africa and elsewhere. In these latter
countries the outcome is more likely to be that foreseen by Demange, Fenge and
Uebelmesser (2008). They forecast a more segmented international market for HE
with some countries concentrating upon high-quality provision and attracting high-
ability international students and other countries providing lower-quality HE
provision for less able and immobile students.
Perversely in the poorer developing countries, lowering the quality of their domes-
tic education system and emphasising country-specific, rather than internationally
applicable, skills in their curricula are likely to lower their outflow of students and
Journal of Education Policy 635

graduates, a possibility discussed by Poutvaara (2008), albeit in the context of the


Bologna process. A similar conclusion is reached by Ionescu and Polgreen (2009) in
their modelling of the brain drain within the USA, with here the argument being based
on the relative inability to utilise the positive spillovers of graduates. They conclude
that ‘countries’ that do not enjoy economies of scale to HE should not invest in public
HE since graduates disproportionately leave and take their future tax base and positive
spillovers with them. Over time, since host countries increase their investment in
human capital as source countries are reducing their own, the consequence is growing
income inequality (Grossmann and Stadelmann 2008). Given the current pattern of the
growth of HE summarised above, this outcome of the expansion of international
education seems a real possibility. It therefore appears that for many developing
countries a high-quality provision path is not feasible if the current level and pattern
of international student and skill movements continue. Hence, concessions by devel-
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oping countries on the ability of developed countries’ HE providers to operate more


freely in their countries, if coupled with a redirection of aid away from international
students, may be desirable. The presumption being that this combination of policy
changes would reduce the net brain drain from developing countries.
If it is desirable for foreign aid to be redirected away from supporting the outflow
of HE students from developing countries, what should become its new educational
priority areas? Whilst recognising the many failures of Western aid efforts and the
limitations of ‘outsider’s actions’ (Easterly 2009), our analysis above provides some
support for proposals to switch from ‘aid’ in the form of student scholarships towards
increased support for local HE providers whilst also providing temporary immigrant
vouchers for less-educated youths from low-income countries. The latter addresses
income-inequality and credit-constraint problems in the source countries and assists
resistance to a decline in the quality of their schooling system. However, it also helps
developed economies to solve their own skill imbalances. A significant inflow of low-
skilled temporary emigrants will lower the relative wages of unskilled labour in
developed economies. The resulting rise in the wage differential between more
educated and less educated workers raises the returns to university study for the
indigenous population in developed economies. In turn, governments and potential
HE entrants in developed economies should respond to these incentives by increasing
participation in high-premia HE studies, such as science, engineering and health
services, offsetting the loss of international students and better matching domestic
skill needs.
In summary, currently the economic gains from the internationalisation of HE are
distributed unevenly between developed and developing countries. The redirection of
educational aid policies towards funding international students has contributed to the
large brain drain from poor to rich countries. Changes to pan-national policies could
potentially address this inequity by altering the nature of internationalisation in favour
of increased provider, rather than student, international mobility. However, the slow
progress of the GATS process illustrates how the impediments to the reciprocal
exchanges of concessions, discussed above, can prevent agreement, even when
mutually beneficial outcomes are possible. In the absence of remedial national and/or
pan-national policies, it is left to policy-makers within educational institutions in
developed economies to reassess their current practice. In particular, to consider
whether their recruitment of international students (and staff) and participation in
franchising and joint ventures in developing countries are consistent with ‘fair trade’
and the reduction in global inequality.
636 N. Adnett

Acknowledgements
The author has benefited from helpful comments made by Peter Davies, colleagues in the Insti-
tute for Education Policy Research, the editor and two anonymous referees.

Notes on contributor
Nick Adnett is the head of research and a professor of economics at Staffordshire University
Business School. He is a member of the Institute for Education Policy Research at that Univer-
sity. In several books, research reports and over 50 published papers, he has analysed many
areas of education and labour market policy.

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