Financing higher education across borders

Due to the Bologna process, cross border Higher Education is expected to develop in the coming years, what casts a new light on the issue of its financing. This paper suggests transferring the costs of foreign students Higher Education from the State, which hosts the students to their State of usual residence, their State of origin. Therefore we propose that each State provides its usual residents with vouchers that they can use either at home or abroad to finance studies in Higher Education institutions recognized by the issuing State. Such a mechanism could avoid externalities and free riding, and increase the efficiency of the Higher Education financing process. On the other hand, by limiting the use of vouchers to recognized institutions, that system is an incentive to improve quality as well as to its labeling and certification.