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This paper seeks to answer the question of what motivates governments to introduce and implement reforms in higher education (HE). The political and economic reasons why some governments in the countries of Central and Eastern Europe (CEE), for the period 1990 and 2015, have invested resources in order to facilitate cooperation between employers and universities, and have introduced quality criteria in HE finance while others have not, are identified. Use of a comparative perspective on Poland and Hungary revealed important differences in HE regulations in these seemingly otherwise very similar cases, showing that what drives regulations, at least in part, is the governments’ responses to the labour market, i.e. the dynamic between students – future workers – and employers – largely multinational companies. Moreover, differences in HE regulations in the two countries are responsive to voters’ concerns. The paper thus contributes to the literature on skill formation in Central and Eastern Europe and to the literature on political economy focusing on this part of the world. [ABSTRACT FROM AUTHOR]