The Financial Impact of Cross-border Student Mobility on the Economy of the Host Country – Studentische Mobilität und ihre finanziellen Effekte auf das Gastland

DAAD/PROGNOS. Studentische Mobilität und ihre finanziellen Effekte auf das Gastland. 2014. Pages: 109.

Commissioned by the German Academic Exchange Service (DAAD) and compiled by the economic research institute PROGNOS, the study examines the revenues and costs of international student mobility. With a focus on international full-time degree mobility students in Germany, the Netherlands, Austria, Poland, Switzerland and Spain, the study tries to answer the question of who benefits from and who eventually bears the cost of international student mobility.

After a brief literature review and presentation of key concepts such as positive and negative externalities, value-added-effects, employment effects, fiscal effects, input-output calculations, and cost-effectiveness, the study presents relevant data concerning the pool of countries chosen for the study. Strong emphasis is put on a holistic approach which encompasses short-time as well as long-time effects of international student mobility. Consequently, the authors establish a calculation method which allows taking into account direct and indirect effects as well as immediate and delayed effects.

Immediate effects:

Public costs and generated revenues through admission to international students calculated as net balance
Consumption effects calculated by means of input-output models

Delayed effects:

Employment rate, gross added value, income tax and social security tax generated through international students staying in the country calculated by means of estimations
Consumption effects calculated by means of input-output models

The findings of the study are, indeed, remarkable. Although a significant cost stems from mostly public allocation of funds to cover the expenses per each international student (71 % to 88 % in the respective countries), international students contribute with a big amount to overall consumption. In 2011, international students spent EUR 1 531 million in Germany, EUR 660 million in Austria, EUR 658 in Spain, EUR million 446 in Switzerland, EUR 338 million in the Netherlands and EUR 116 million in Poland. In the case of Germany, the authors demonstrate that out of this amount of consumption, EUR 400 million go to the public budget through purchase tax. Another positive effect contributes to direct employment, which is estimated to amount to 22 000 jobs in Germany due to the presence of international students.

A crucial factor in answering the question to which extent international student mobility ‘pays off’ for the host country depends on whether international students stay or leave the country. Calculations on this issue, however, are only based on estimations of rates of 20 % and 30 %. In consequence, in the case of Germany a 20 % and 30 % rate would contribute to EUR 2.3 billion and EUR 3.4 billion as gross value added respectively. Austria and Spain would similarly benefit with approximately EUR 800 million or up to EUR 1.3 billion depending on the rate of 20 % or 30 %. Per head this entails gross value added of up to EUR 124 447 in Switzerland, EUR 74 074 in the Netherlands, EUR 73 913 in Austria, EUR 70 362 in Germany, EUR 57 445 in Spain and EUR 22 087 in Poland. Other positive effects include likewise the creation of jobs (up to 0.34 jobs per former international student in Switzerland, 0.3 in Germany and 0.26 in Austria) and the public budget (up to EUR 28 227 in Germany, EUR 25 097 in Austria and EUR 19 389 in the Netherlands).

Although the numbers seem impressive, it has to be emphasised that they are based on estimated rates as well the assumption of high earnings for highly skilled workforce. Moreover, the calculations do not include estimations on potential cost intensive effects on the social welfare system.

For further information and complete data, the report in German language is available here.

For an executive summary in English, click here.