Competition for the international pool of talents : education policy with student mobility

The paper presents a model of two countries competing for the international pool of talented students from the rest of the world. To relax tuition-fee competition, countries differentiate their education systems in equilibrium. While one country offers high education quality at high charges for students - the most talented ones study in this country - the other one provides lower quality and charges lower tuition fees. The regional quality-differentiation increases with the size of the international pool of talents, with the stay rate of foreign students in the host countries upon graduation and with the degree of development of the sending countries of foreign students. Compared to the welfare-maximizing education-policy, the decentralized solution is likely to imply an inefficient allocation of foreign students to the two host countries, as well as an inefficient quality differentiation