Assessing the Economic Impact of International
Students Enrollment in North America:
A Panel Cointegration Approach
Isaac Otoo
University of Victoria
01-12-2025
Otoo (2025)
Motivation
1
The economic contribution of international students are
immeasurable
2
Contribute to economic development via:
Direct spending through tuition, living expenses, etc
Supply of skilled labor
Technological advancement and research innovation
Setting up successful businesses
Otoo (2025)
Motivation
Aside their economic impact, international education:
Enhances cultural diversity and exchange
Plays a key role in international diplomacy and trade relations
This research:
Estimate the long-run relationship between international
students enrollment and economic growth.
To simulate the policy impact of a cut in the number of study
permits issued.
Otoo (2025)
How International Students Spending Ripples
Through the Economy: An Explainer
1
Direct Demand: International student purchases a good or
service ⇒ creates immediate demand.
2
Indirect Effects: Firms increase production, requiring more
intermediate goods and services.
⇒ Suppliers expand output as well.
3
Induced Effects: Higher wages and employment lead workers
to spend more,
⇒ generating further rounds of demand.
4
Multiplier Effect: The initial spending ripples throughout the
economy, magnifying total impact.
Otoo (2025)
Some Facts: Canada
Roslyn Kunin & Associates Inc. (2023) estimates that;
1
International students spent over $37 billion in 2022
2
Represents more than a fifth (21%) of the value of services
exports and 5 percent of total merchandise exports
3
Ranked 4th in the top 10 exported goods in Canada, surpassing
products such as wood and wood products, fertilizers, etc.
Otoo (2025)
Some Facts: United States
1
2
Total education services exports was worth US$54.8 billion.
Out of every $1 earned from education service exports, about
$0.9 comes from education-related services.
3
Export of education-related services ranks 7th among service
exports.
4
Every three international students create or support one U.S. job.
Otoo (2025)
Plot: GDP vs. Int’l Students Enrollment
15
17.0
14.4
14
GDP (right scale)
16.5
GDP (right scale)
Int'l students enrollment (left scale)
14.0
log scale
12
log scale
log scale
14.2
13
16.0
Int'l students enrollment (left scale)
12
15.5
11
13.8
10
1990
2000
2010
Canada
Otoo (2025)
2020
13.6
11
10
15.0
1950
1960
1970
1980
1990
2000
United States
2010
2020
14.5
log scale
13
Empirical Estimation
Estimates the long-run static model:
yit = αi + β1 xit + γ ′ Zit + µit ,
Where:
yit is the dependent variable for country i at time t, i.e. GDP;
xit is the main explanatory variable for country i at time t, i.e.,
international students enrollment.
Zit is a vector of control variables for country i at time t,
including money supply measured by M2, debt to GDP ratios,
trade openness, unemployment, and recession dummy.
αi are country fixed effects
Otoo (2025)
Empirical Estimation
Solving the panel error correction gives:
∆yit = ϕi µ̂it−1 +
p−1
X
k=1
λik ∆yit−k +
q−1
X
θik ∆xit−k
k=0
Where
µ̂it−1 = yit−1 − αi − β1 xit−1 − γ ′ Zit−1
Otoo (2025)
Empirical estimation cont’d
Specifically, I estimate the below model:
GDPit = αi + β1 Studit + γ1 MPit + γ2 FPit + γ3 Uempit
+ γ4 ritd + γ5 Openit + µit
I then test whether the residuals from my static model, µ̂it , has a
unit root.
If the error term is I (0), I proceed further to estimate the panel error
correction model below:
∆GDPit = ϕ ECTit−1 + λi1 ∆GDPit−1 + θi0 ∆Studit + θi1 ∆Studit−1 ,
where the error-correction term (ECT) is defined as:
ECTit−1 = GDPit−1 − αi − β1 Studit−1 − γ1 MPit−1 − γ2 FPit−1
d
− γ3 Uempit−1 − γ4 rit−1
− γ5 Openit−1 .
Otoo (2025)
Data Sources
1
Canada:
International students enrollment, GDP, exports, imports,
unemployment rates, and debt to GDP ratio were sourced from
StatsCanada.
M2 money supply was taken from Bank of Canada
Recession data was taken from NBER.
2
United States:
International students ⇒ Institute of International Education.
GDP, export, import ⇒ Census Bureau.
The rest of the data were taken from NBER.
Otoo (2025)
Thank You!
Questions or comments?