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The Economic Impact of Foreign Fee-Paying Students

This report examines the total contribution of foreign fee-paying students to the GDP and analyzes the economic multipliers associated with their expenditure. The methodology used includes estimating total expenditure on tuition fees and living costs, calculating economic multipliers, and applying them to gross output, employment, and value-added.

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The Economic Impact of Foreign Fee-Paying Students

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  1. The Economic Impact ofForeign Fee-Paying Students Report to Ministry of Education February 2006

  2. Total Contribution to GDP (including direct, indirect and induced) 1999: $545m 2001: $1250m 2004: $2210m

  3. Methodology • 1. Estimate total expenditure on: • Tuition fees (Export Education Levy data) • Living Costs (NZUSA survey for public tertiary sector, extrapolation of past/regional relationships for other sectors) 2. Calculate economic multipliers (from input-output tables): Type 1 multipliers – direct + indirect upstream Type 1 multipliers – direct + indirect upstream + induced downstream • 3. Apply economic multipliers to: • Gross output • Employment • Value-Added (contribution to GDP)

  4. Methodology Limitations • Don’t allow for income leakages from taxes returned as income from welfare benefits etc; • Don’t include the effect of new investment which may be needed to expand output and may be financed out of operating surplus; • FFPS must pay the same per unit of service delivered than government provides for a domestic student, and that the fee is based on average costs.

  5. Can only address above with a multi-industry General Equilibrium Model: • Incorporates all main linkages between agents in the economy – businesses, government, households etc; • Does not assume that all factors of production are in excess supply; • Allows for price changes (such as if a factor is in limited supply) which may lead producers to change inputs, thereby altering their production structure and hence the associated economic multipliers; • Does not force average relationships to hold at the margin; • Automatically calculates net multiplier effects by reducing the gross effects to the extent that they pull resources out of other productive uses (that is trade diversion).

  6. Table 1 Expenditure by Foreign Fee-Paying Students

  7. Table 2Economic Multipliers and Results

  8. Table 2 (continued) Economic Multipliers and Results

  9. Caveats • Poor data on spending by other than public tertiary students. • Ignore income earned by foreign students from employment. • Ignore related tourism – eg family visiting at graduation. Absolute priority - dedicated expenditure survey

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