Michael Fritsch, Maria Greve (p), Michael Wyrwich

Francesco Pigliaru

In this paper we argue that there is still a negative impact of socialist legacy on innovation and R&D cooperation in regions of Central and Eastern European (CEEs) countries. We particularly focus on the channels behind such a negative link. A main conjecture is that trust and quality of government are negatively affected by socialist exposure. Therefore, both are crucial mediators of the negative relationship between socialist legacy and regional innovation. To the best of our knowledge, this is the first study decomposing the innovation gap of post-socialist Eastern European countries.

Francesco Foglia, Francesco Molica, Anabela Santos (p)

Maria Greve

Historically, cohesion policy is the area of the EU budget recording the highest rates of irregular spending (ECA, 2021). This concept refers to financial spending that do not comply with the established procedures or regulations. It is not automatically associated with fraudulent activities, as it can be the result of unintentional errors, mismanagement, or failure in the implementation of financial protocols. Despite a significant decline over time (Poverari & Davis, 2011), irregularities continue to affect the smooth implementation of the policy and its impact in several areas. Furthermore, they contribute to denting its reputation, entrenching negative narratives about EU funds in the public discourse and fuelling arguments in favour of budgetary cuts (Mendez & Bachtler, 2017). The complexity of rules and lack of administrative capacity are arguably the two main causes of irregular spending (Meuleman & Brenninkmeijer, 2017). Empirical research is needed to explore the underlying determinants of compliance errors, as there are only sporadic works on this so far. Identifying and understanding the drivers of irregular spending is crucial to ensure transparency, accountability, and the effective use of financial resources. The paper contributes to filling this research gap by investigating through a fractional regression model the relationship between irregular spending, measured as the error rate - expressed in percentage - reported by programmes, and programme-specific characteristics. To conduct such analysis, we use a time series data covering from 2015 to 2021, regarding the 2014-2020 cohesion policy programmes extracted from the European Commission’s Cohesion Open Data platform. More specifically, programme-specific characteristics include the governance model (regional versus national), structure (mono- versus multi-fund), its performance (absorption rate), average size of operations (share of big projects), and funding thematic concentration. The novelty of the paper is that by probing these aspects, most of which have never been tested so far, it contributes to a better understanding of what drives irregular spending and can then help draw critical policy conclusions as to the future design of rules and programmes.

Francesco Pigliaru (p), )Luciano Mauro

Anabela Santos

This paper explores the optimal size of government in the context of economic growth, integrating Kremer's O-ring theory with the concept of social capital. The theoretical debate on the relationship between government size and economic development has been diverse, with some studies finding positive effects, while others note negative impacts. The literature often points to an inverted U-shaped relationship, indicating the existence of an optimal government size that maximizes long-run growth.
The study employs Kremer’s O-ring theory, traditionally used to understand production processes, in the context of government bureaucracy. Kremer's model, which highlights the significance of human capital in determining the probability of successful task completion, is extended to encompass the role of social capital. This approach suggests that the quality of government services and efficiency is significantly influenced by the shared values and beliefs of public servants, encapsulated in the concept of civicness. The high levels of social capital in Nordic countries, which correlate with efficient government services, provide a practical illustration of this theory.
The paper argues that social capital, understood as the set of shared values and beliefs that enhance cooperation within a society, plays a crucial role in determining the productivity of public services. This relationship is formalized by adapting Kremer’s O-ring theory to the public sector. The model developed in the paper assumes that the production of public services combines final goods and the labor of public officials, whose effectiveness is influenced by their social capital.
In summary, this paper presents a nuanced view of the optimal government size by positing that social capital is a key determinant in assessing the optimal size of government, especially in terms of maximizing long-run economic growth. The findings have significant implications for understanding the role of government in economic development and provide a theoretical framework for analyzing the efficiency of public services in different socio-cultural contexts.