33098 Paderborn / GermanyCompetition for the International Pool of Talent: Education Policy and Student Mobility ∗

This paper presents a model of two countries competing for a pool of students from the rest of the world (ROW). In equilibrium, one country offers high educational quality for high tuition fees, while the other country provides a low quality and charges low fees. The quality in the high quality country, the tuition fees, and the quality and tuition fee differential between the countries increase with the income prospects in ROW and the number of international students. Higher stay rates of foreign students lead to more ambiguous results. In particular, an increase in educational quality can be accompanied by a decline in tuition fees. Furthermore, international competition for students can give rise to a brain gain in ROW.