College Admissions Policy of International Students: Theory and Evidence

As college education has become one of the leading export industries in the U.S., issues related to international students have attracted increasing attention. In this paper, we investigate potential explanations for the recent expansion in enrollments of undergraduate international students, with a particular focus on an analysis of the supply-side of educational services. Our theoretical and empirical work identifies an important determinant of differences across colleges in the enrollment of different types of students, namely the level of states' financial support of 4-year public institutions. Specifically, public colleges increase the proportion of out-of-state students in general, and international students in particular during the 2008 to 2012 period, as these students on average pay higher tuition rates, and thus can provide additional tuition revenue and offset the loss of state support. This adjustment is particularly large for selective institutions. Moreover, estimates using administrative student visa data with country of origin information suggest that the growth in international students is largely Chinese students. Further, we find evidence that these changes in the composition of the student body at public colleges have been accompanied by changes in tuition rates and student body size. These changes have important implications with respect to human capital acquisition across student types with type defined by home location and ability.