Universities as Firms: The Case of U.S. Overseas Programs
NBER Volume, Forthcoming
Posted: 27 Jan 2009 Last revised: 21 Sep 2013
Date Written: July 16, 2009
We observe two waves of overseas programs offered by U.S. universities: A supply driven wave in the late 1980s to the mid 1990s, and a current wave beginning in the early 2000s, with distinctly different players. We compile a comprehensive dataset on overseas degree programs and host country characteristics. The data reveal that universities behave much like multinational corporations when they make investments overseas. Finance plays an important role. Real GDP per capita and tertiary school age population are two key determinants of the location choice. Asia and the Middle East are popular destinations for U.S. overseas programs, driven by market size and oil money, respectively. U.S. universities offer lower tuition discounts in countries with higher real GDP per capita. Undergraduate degree programs are discounted more than master degree programs because of greater local competition. When universities reduce costs through partnerships with local universities or through financial support from local governments, the savings are not passed on to local students in the form of lower tuition.
Keywords: higher education, overseas program, foreign direct investment
JEL Classification: I20
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