Paying out and crowding out? The globalization of higher education

Increased globalization of higher education has occurred as more students from across the world now enrol in universities abroad for their post-school education. We study the consequences of having more foreign students in one of the world’s biggest receivers of international students, the UK’s higher educational system. To do so, we estimate the impact of growing numbers of international students on the number of domestic students. Using rich administrative data, we find no evidence of crowd out of domestic undergraduates whose enrolment numbers are regulated by maximum quotas. For domestic postgraduates, who do not face such quotas, there is evidence of crowd in. We establish causality of this relationship by employing two empirical strategies to predict exogenous international student growth. The first uses shift-share instruments based on historical patterns of student enrolment from countries attending specific university departments. The second is based on the fast growth in enrolment of Chinese students which was facilitated by changes in visa regulations in combination with distinct subject of study preferences.