Large but variable increases in tuition fees may have a limited impact on overall student numbers, but are likely to restrict the range of institutions applicants consider, with knock-on effects on the prestige of degrees and graduates' longer-term job prospects, research has found.

The findings of a study on the impact of fee increases were presented to the Royal Economic Society's annual conference, held at Royal Holloway, University of London last week. The research was carried out by Arnaud Chevalier, senior lecturer in economics at Royal Holloway, and Gauthier Lanot, professor of economics at Keele University.

The study says that although the 2004 ÖйúAƬ Act upped tuition fees from ?1,200 a year to ?3,000, this led to a decrease of only about 2 per cent overall in applications to university.

But since modifications to the fees regime were accompanied by changes to maintenance loans and means-tested grants, it is hard to isolate the impact of these earlier fee increases and predict what further rises might mean, it adds.

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The situation in Wales, however, generated more revealing data, the researchers report. Since 2004, Welsh students opting to study in their own country have qualified for a ?1,800 grant, cancelling out the rise in fees and giving them a direct financial incentive to stay in Wales.

As a result, say Dr Chevalier and Professor Lanot, Welsh applicants became 10 percentage points more likely to accept offers in Wales, even if this meant opting for marginally lower-ranked subjects and institutions.

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The reforms, in effect, "reduced the set of potential institutions for Welsh applicants", they add.

Given that the 2004 Act "mostly compensated the increase in tuition fees with generous, interest-free loans", allied to the fact that England is about to witness a far more significant intensification of the financial burden many students will shoulder, it is hard to extrapolate to the situation today, they say.

The question of whether there will be a more significant reduction in the total pool of applicants as a result of fee rises is particularly hard to judge.

Nonetheless, Dr Chevalier and Professor Lanot conclude, the Welsh experience provides evidence that "students react to change in the relative price (of) ÖйúAƬ" and to some extent trade university rankings for tuition fees.

As such, "any reform creating a market for ÖйúAƬ may lead to a large change in the distribution of applicants between institutions".

matthew.reisz@tsleducation.com.