Mihai-bogdan Petrisor (p), Elena Cigu

The theory and empirical evidences show us that fiscal decentralization enhances government efficiency by restraining the size of public sectors. Regarding to the size of the public sector, a series of articles were studied and also published, that are based mainly on the Armey curve. With the long experience of the various states and the rich literature on the field, it can be noticed that it is not possible to separate or formulate a rule that maximum economic welfare can be ensured on the background of "small" or "large" public expenditures (government size). In this paper we studied the relationship between fiscal decentralization and local expenditure and analyze how the vertical fiscal imbalance shapes this relationship. The empirical analysis is based on a panel of 11 economies of the European Union that are located in Central and East of Europe over the period of time 2000 – 2015. We estimate that our results to show that fiscal decentralization increases government spending (government size). In contrast, revenue decentralization has little influence on local government expenditures. We will show that the differences in the effects of expenditure and revenue decentralization can be attributed to the distortionary effects caused by the vertical fiscal imbalance.

Artur Ochojski (p)

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Jan Wedemeier (p), Mirko Kruse, Wieslaw Urban, Robert Girejko

The smart specialization strategy (S3) is one of the key instruments for Europe’s regional development. S3 gives a new building block for collaboration in the European Union Cohesion policy. It considers the regional diversity to build a competitive advantage and increase the position in the knowledge economy. Moreover, the framework suggest to focus on different technology strategies, the leader regions capitalize in the invention of new technology, the followers invest in the co-invention aspect of technologies (Foray et al. 2009, McCann and Ortega-Argilés 2015).

However, the situation in the Baltic Sea region is quite diverse in a sense of the development of the regional innovation system (Kruse, Wedemeier 2018). One strategy to develop the competitive advantage of moderate innovators regions is to develop a strategy to overcome the localized lock-in problematic. A transnational S3 is therefore required, which considers interregional knowledge and learning. But the heterogeneity makes it sophisticated to develop and implement such a common strategy. The here suggested approach of a common transnational S3 framework is developed within an INTERREG Baltic Sea Region project named “GoSmart – Strengthening smart specialisation by fostering transnational cooperation”. For this, the project developed a methodology in five process’ sequences, which include analytical, market technology trends, internationalization potential, and stakeholder aspects in the S3 development. The results show that a common approach is useful, against the background that the socio-economic structural similarities of the selected Baltic Sea regions are very challenging.