This paper explains the puzzling developments in higher education (HE) in 10 countries of Central and Eastern Europe (CEE) after 1989. Here enrolments have increased up to six fold in some of the countries while public and private funding devoted to HE have lagged behind. This paper explains the channels that have led to these outcomes. It argues that this supply of skills, i.e. increasing enrolments, can be explained by the demand structures for high skills in these CEE markets. Indeed, the most relevant private employers in the market, multinational companies (MNCs), play the crucial role on the demand side for high skills, while the governments play the decision-making role on the supply side, by liberalizing HE.The preferences of different institutional actors and their links to each other are analyzed by using survey data on firms collected by the European Bank for Reconstruction and Development (EBRD). The paper explores the demand for HE stemming from private employers and it shows that MNCs are more likely than domestic ones to employ HE graduates. Subsequently, the analysis of individual incentive structures of students shows that, in turn, young graduates also choose MNCs as preferred employers. These findings provide support for the model linking the development of HE to MNCs. This research thus adds to the growing political economy literature on skill formation and enriches our understanding of higher education as public policy concern.
Silvana Tarlea is DPhil candidate at the Department of Politics, University of Oxford, and works with Prof. David Soskice. Her research focuses on skills formation, higher education and the political economy of post-socialist transitions in Central and Eastern Europe.