Abstract
This study examines the social and economic impacts of digital and “smart” settlement development in Hungary, focusing on the implementation of the European Union’s digital strategies within the framework of national programs such as the Digital Wellbeing Program and the Digital Settlement Program By analyzing four Hungarian case studies—Nagypáli, Ceglédbercel, Tamási, and the Northern Hegyháti Micro-Regional Union—the paper explores how digital technologies contribute to social cohesion, innovation capacity, and regional competitiveness. The findings indicate that the successful application of digitalization depends largely on community participation, municipal capacity, and institutional stability. Financial analysis reveals that while digitalization initially increases local expenditures, it enhances long-term fiscal efficiency through cost reduction and improved service delivery. The study concludes that the sustainability of Hungary’s digital settlement initiatives lies in the integration of technological modernization, social innovation, and regional cooperation, fostering both social renewal and fiscal resilience but with certain specificities which are connected to the nature of Hungary-EU relations.
Introduction
In hindsight, the European Union’s digital policy frameworks—particularly the Digital Single Market Strategy for Europe (DSMS, European Commission, 2015) and the Digital Decade Compass (European Commission, 2021)—represent a paradigm shift in development policy. These strategies emphasize digitalization as not only a technological but also a socioeconomic and cohesion-oriented process. In this context, Hungary has sought to align its national initiatives with EU objectives through the Digital Wellbeing Program (DWP) and its subprograms, including the Digital Settlement Program (DSP).
The concept of a digital settlement extends beyond mere infrastructure modernization; it reflects a holistic development model integrating technology, human capital, and participatory governance to improve the quality of life and ensure sustainability. This study investigates how digital and smart technologies can enhance resilience, social innovation, and economic competitiveness within Hungarian municipalities.
By combining theoretical and empirical analysis, the research contributes to understanding how small and medium-sized settlements in Hungary adapt to the digital transition. Through four illustrative case studies, it explores the institutional, financial, and social dimensions of local innovation within the EU’s digital framework.
The cases presented in this article hold relevance regarding certain key analytical dimensions known in international public policy debates: settlement size, governance scale (single municipality versus inter-municipal cooperation), thematic focus (energy, mobility, digital administration, and community services), and institutional embeddedness. At the same time, all four initiatives were implemented within a compact temporal and policy context—namely, the second half of the 2010s under the DWP and related EU funding instruments—ensuring analytical coherence. This controlled diversity allows for comparative insights into how similar policy objectives produce different outcomes depending on local institutional and social conditions.
Opening Remarks on the Context of EU-Hungary Relations in the Light of the Union’s Digital Strategies
The concepts of “digital settlement,” “digital municipality,” “smart city,” and “smart village” are similar: they represent a shift in development policy and societal paradigms, where technological innovation serves sustainability, inclusivity, and the improvement of quality of life (Caragliu et al., 2011; Komninos, 2013). The European Union’s Digital Strategy (DS), looking forward to 2030,
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is built on promoting data-driven development to mitigate the uneven development of urban and rural areas (European Commission, 2021), according to as follows: “Societal needs for converging upload and download bandwidth are constantly growing. By 2030, networks with gigabit speeds should become available to those who need or wish to have such capacity. All Union end-users should be able to use gigabit services provided by networks at a fixed location deployed up to the network termination point. Moreover, all populated areas should be covered by a next-generation wireless high-speed network with performance at least equivalent to that of 5G.” (DS, recital, paragraph 13).
One may conclude that, in terms of overall competitiveness, the referred DS reflects excessive optimism by assuming digital leadership in paragraph (13) of the recital of the text by emphasizing the “digital leadership by the Union” [DS, recital paragraph (13)]. However, the EU-wide policies related to digital settlements (municipalities or local governments) are meant to promote rural development with the logic that real competitiveness gains ought to be achieved effectively by
Utilizing digital technologies for the sake of rural development policy was an explicit line of thought in the previous corresponding EU strategy as well, namely, the DSMS (European Commission, 2015) 2 : Paragraph 5.1. prescribes that “Particular efforts are needed to close the digital gap between urban and rural areas.” (DSMS, European Commission, 2015). The textual analysis of the two EU Commission documents clearly shows that in this respect the EU policy decision-makers permanently upheld their conviction that rural development lies not in the enhancement of traditional rural values such as sustainable farming or wildlife conservation but is—at least partially—related to digital technologies which have the potential of diminishing the differences between rural and urban areas to the benefit of the former. In this context, digitalization is not only an economic competitiveness factor but also a means for social cohesion and strengthening local communities. The aim is for information and communication technologies (ICT) tools and digital solutions to enhance the competitiveness of rural areas, improve access to services, and strengthen community cohesion (European Network for Rural Development [ENRD], 2018).
Regarding the notion of “Smart” development, it needs to be clarified that this concept does not merely involve technological modernization; reference to “Smart” development signifies policies which introduce new forms of governance and participation—or at least having the declared ambition thereof. According to the available scientific literature, the value of smart settlements lies in their ability to combine data-driven decision-making mechanisms with community participation, thus promoting democratic, sustainable, and adaptive urban functioning (Cardullo & Kitchin, 2019; Hollands, 2015). Integrating social aspects, however, remains challenging: early technocratic smart city models often marginalized human factors, equitable access, and local needs (Kitchin et al., 2019), which observation hints that the EU’s grand strategies and the micro-level materialization of them tend to occasionally collide. The concept of a “smart village” emerged as a rural adaptation of urban models within EU development policy, particularly in the late 2010s. Its foundation lies in the recognition that integrating ICT into settlement infrastructure, governance, and services can enhance efficiency, sustainability, and citizens’ well-being (Hollands, 2008; Komninos, 2013). Therefore, a smart city is not merely a technological innovation but a complex socioeconomic system emphasizing data-driven decision-making, networked cooperation, and citizen participation (Nam & Pardo, 2011).
While urban smart developments are often infrastructure-oriented, rural programs emphasize social innovation and community-led initiatives (Dudás, 2020).
The Hungarian Development Path in Digital Technology Means for Rural Development Ends, the DWP, 2015 to 2022
The DWP—in line with its name—had the ambition to technologically modernize certain welfare subsystems instead of the internal operations of bureaucracy, the typical reform policy of the 2010s (Markaki et al., 2010). According to its declared objectives, DWP—was supposed to be a breakthrough in digital developments. The DWP—launched by the government of Hungary at the end of 2015—was based on the results of a national consultation on the internet and digital developments and had the ambition of affecting the entire digital ecosystem. 3
The original strategy had the ambition of leading the digital development of Hungary in all walks of life, business, and public services. Sub-strategies defining the digital development directions for the coming years were prepared: Hungary’s Digital Education Strategy, Hungary’s Digital Export Development Strategy, Hungary’s Digital Startup Strategy, and Hungary’s Digital Child Protection Strategy. Furthermore, the official website of DWP emphasized that Hungary contributed to the work of the EU Commission in making certain European-wide decisions with all the players in the digital ecosystem, such as the reduction of value-added tax on internet use services (in two steps: from 27 to 18 and then to 5%). The “Digital Welfare Program 2.0” (DWP2.0) included accessible and affordable internet for all and network infrastructure development. In 2020, an interesting remark was included in the DWP, namely, that digitalization was understood as a question of sovereignty as much as of competitiveness. The official website of the DWP underpinned this change of strategy by emphasizing the challenges the democratic governance structure and the rule of law faced like never before—maybe a reference to the tensions of EU-Hungary relations and the 2015 migrant crisis (Cantat & Rajaram, 2019). Moreover, the Government also adopted Decision No. 1488/2016. (IX.2.) on the Digital Child Protection Strategy of Hungary, which was an internet safety action plan that promoted digitalization for value-creation among the youth. In 2020, several key strategic documents prepared within the framework of the Digital Well-being Program will be submitted to the Government, such as the Artificial Intelligence Strategy of Hungary, 4 and the Action Plan for the Digital Agricultural Strategy.
Regarding its outlook for the future, the DWP contained a remarkable segment, namely, to propose new solutions and institutions that could effectively interpret and manage the global challenges and opportunities created by digitalization in international cooperation. This objective, however, appears to have remained unmet. According to the current form of the DWP, the state takes responsibility for the digital well-being of its citizens; therefore, the central theme of the DWP 2030 is digital (state) governance. In line with this approach, the integration of digitalization and regional development policies is envisioned by the DWP but is detailed in the DSP and the Territorial and Settlement Development Operational Program Plus (TOP Plus). These programs aim to enable settlements (municipalities)—particularly small villages—to exploit the potential of ICT to their advantage. The public policy aim of the concept of smart villages seeks to enhance population retention in rural Hungary, improve quality of life, and diversify local economies (Digital Wellbeing Program [DWP], 2022). Under the Digital Wellbeing Program (DWP). the DSP was launched as a separate subprogram in 2019 to develop digital competencies of local governments and residents and to support the implementation of smart solutions at the settlement level. This initiative aligns with the EU’s “Digital Europe” and “Smart Villages” strategies and aims to reduce territorial disparities (DWP, 2022). The bulk of the actual digital rural development programs were carried out under the previous EU strategy: DSMS. This strategy was operationalized in Hungary in the form of the “Digital Wellbeing Program” (or rather: the Digital Welfare Program). This Program is no longer operational, according to the Program’s official website. 5
This article uses four examples of rural case studies for digital development in Hungary. The four case studies—apart from exemplifying the deeply embedded, enculturated innovativeness (Gellén, 2016) of the public sector in general and municipal local governments in particular—illustrate the overarching micro-level organizational effects of the highly complex EU-Hungary relations Hungary being the smaller, receiving partner (Výrostová & Nyikos, 2023). With respect to the latter remark, it is important to emphasize that the general Hungarian digital development policy is tangibly behind its time and possibilities (Gellén, 2025). This has at least two root causes: (a) apart from the obvious underrepresentation in terms of EU financing (Scheppele & Morjin, 2025) this being the lesser cause, (b) the more profound reason is that in the era of AI-powered technology, size began to matter even more than before due to scaling of computing capacities (Lau, 2025) and electric energy demand in which small countries face an increasing disadvantage (Bogmans et al., 2025) of not being able to supply the electricity required by the advanced AI hubs. Therefore, the small and recalcitrant member state has increasing difficulties in acquiring EU funds, but on the other hand, it must also face the technological reality of losing competitiveness in the dimension of economies of scale, thus the apparent gradual loss of motivation reflected by its strategic documents.
Research Questions
This study aims to explore the social and economic impacts of smart and digital settlement development on local communities and regional development dynamics. The research addresses two fundamental questions:
How do digital technologies contribute to increasing social cohesion, innovation capacity, and competitiveness in settlements and regions?
How do smart solutions shape local governance, citizen participation, and public service quality in Hungarian settlement practices?
The theoretical and empirical basis of the research consists of international literature and analyses of Hungarian best practices, including Nagypáli, Ceglédbercel, Tamási, and other smart (but small—even by Hungarian standards) settlements. The study seeks to illustrate the complex, interdisciplinary nature of smart settlement development, where technological innovation and social participation mutually reinforce sustainable regional development.
Theoretical and Conceptual Frameworks
The Understanding of Digital and Smart Settlements for Regional Development
International literature offers numerous definitions of a “smart” settlement. According to Caragliu et al. (2011), a smart city is a place where investments in human and social capital, as well as ICT infrastructure, foster sustainable economic growth and a high quality of life while using natural resources efficiently. In contrast, Kitchin (2015) critically notes that smart city models often rely on technocratic logic and may fail to address social inequalities or the lack of democratic participation. Other definitions include references to spatial planning (Zieliński, 2025), green development (Kozera et al., 2024), or means of sustainable development goals in Europe (Balderacchi & Piacentini, 2024).
Digitalization has become an important element of regional development in the EU. Technological infrastructure—particularly including broadband internet, data management systems, and automated services—were essential in the 2010s for without them, peripheral areas risk falling further behind the more central areas (Malecki, 2018). In this period, EU-level regional policy increasingly focused on making digital innovation accessible not only in cities but also in rural and small-town areas. The European Commission’s (2021) “Digital Decade” strategy emphasizes that digitalization is not an end in itself but a driver of economic growth, sustainability, and social inclusion. From a regional development perspective, digital tools enable data-driven planning, participatory decision-making, and more efficient use of local resources.
In Hungary, the 2021 to 2027 cycle of the Territorial and Settlement Development Operational Program Plus (TOP Plus) prioritizes the development of digital public services, the creation of local innovation ecosystems, and the strengthening of social cohesion. Thus, smart settlement development is not only a technological tool but also a means of regional integration that can reduce spatial inequalities and improve rural quality of life (Horváth, 2021).
The Interdisciplinary Nature of Smart Developments
Smart settlement development intersects multiple disciplines—public administration, economic geography, computer science, sociology, and environmental policy, let alone traffic engineering (Macioszek et al., 2022) or any other horizontal policies such as sustainability in the environmental or resource-efficiency dimensions (Almulhim & Yigitcanlar, 2025). Successful application of digitalization is not merely technological but also a social innovation process requiring the knowledge, attitudes, and participation of local communities (Neirotti et al., 2014). “Smartness” is therefore measured not only by the sophistication of tools but also by governance, networked collaboration, and integration of local knowledge.
In this light, developing smart settlements is a complex task that requires strengthening social capacities alongside technological infrastructure. Hungarian examples demonstrate that linking digitalization with local community initiatives can mitigate territorial disparities and open new developmental pathways for rural areas. In retrospect, the smart settlement concept appears a vague, sweeping notion in which many development initiatives were inserted. In this article, we focus exclusively on small, rural settlements in which development projects were carried out under the smart settlement banner.
Social and Economic Impacts of Smart Settlements
The development of smart settlements is not merely technological modernization but a profound social and economic transformation. Smart solutions—such as digital public services, data-driven decision-making, e-governance, and energy management systems—reshape all levels of municipal operations. While early developments focused primarily on infrastructure and efficiency, today, greater emphasis is placed on social innovations, community participation, and local economic development (Albino et al., 2015).
Social Innovation and Community Participation
A key factor in the success of smart settlements is the active involvement of local communities. Digital technologies can only strengthen social cohesion if citizens can use and shape them. Community participation is especially crucial in rural areas, where social capital—trust, cooperation, and community identity—is vital for the sustainability of developments (Bănică et al., 2021).
European smart village programs demonstrate that introducing digital solutions often sparks new community initiatives, such as local knowledge-sharing platforms, community gardens, or energy cooperatives (ENRD, 2018). These developments not only improve the quality of life but also foster social integration and intergenerational cooperation.
In Hungary, settlements supported by the DWP—such as the small municipalities of Tamási and Ceglédbercel—implement digital projects with community involvement: citizens are not merely users but co-designers of smart solutions. Community applications, digital forums, and public data platforms promote the development of “digital citizenship,” a key element of modern governance (Cardullo & Kitchin, 2019).
Economic Impacts and Competitiveness
One of the most important economic effects of digital settlement development is the enhancement of local competitiveness. Developing ICT infrastructure, digitalizing local businesses, and introducing knowledge-intensive services contribute to diversifying the local economy and retaining the workforce (Komninos, 2013). Smart developments can create new types of jobs—such as remote work, digital services, or data processing—which can strengthen population retention in rural areas (Malecki, 2018).
However, economic benefits are not automatic: the impact of digitalization strongly depends on local human capital, educational infrastructure, and municipal management capacities (Neirotti et al., 2014). In Hungary, the regional distribution of smart developments is uneven: the digital divide between large urban centers (e.g. Budapest, Debrecen, Győr) and smaller settlements remains a challenge. The DSP specifically aims to reduce this gap through the implementation of the “smart countryside” concept.
Sustainability and the Quality of Life
A third dimension of smart developments is improving the sustainable quality of life. Environmentally friendly technologies—such as bio-solar systems using renewable energy, smart public lighting, and intelligent waste management—enhance both cost efficiency and environmental awareness (Ahvenniemi et al., 2017). The example of Nagypáli in Zala County demonstrates how renewable energy-based developments can become part of local identity and encourage environmentally conscious behavior.
In smart settlements, the link between technological innovation and quality of life manifests at multiple levels: digitalizing healthcare and social services improves access; smart transportation systems reduce environmental impact; and e-governance solutions make local decision-making more transparent and efficient. All of these contribute to increased settlement-level resilience, which is critical in a rapidly changing social and economic environment (Meijer & Bolívar, 2016).
Challenges and Limitations
Although smart settlements offer numerous positive impacts, developments are not free from risks. Digital inequality, data security concerns, and technological dependence introduce new social challenges (Hollands, 2015). Older generations, populations with limited digital skills, or disadvantaged regions may be excluded from smart solutions.
Addressing these challenges requires complex, multilevel governance, with collaboration among central authorities, municipalities, civil organizations, and local businesses. The key to success is therefore not technology alone but collaborative governance and inclusive development policies (Bulu, 2014).
Hungarian Case Studies: Domestic Practices of Digital and Smart Settlements
Introduction: Digitalization and Local Development in Hungary
The implementation of digital and smart settlement policies in Hungary represents a broader public policy effort to reduce territorial inequalities and enhance local governance through technological modernization and social innovation. The DWP (2022) and its subprogram, the DSP, were launched to enable local governments to exploit ICT for improved service delivery, citizen participation, and sustainability. These initiatives align with the European Union’s Digital Decade and Smart Villages frameworks, which emphasize rural inclusion, digital literacy, and community-based innovation (ENRD, 2018; European Commission, 2021).
While Hungary’s digitalization policy demonstrates strategic ambition, local implementation varies considerably across municipalities due to differences in capacity, size, and governance stability. The following section presents four representative Hungarian case studies—Nagypáli, Ceglédbercel, Tamási, and the Northern Hegyháti Micro-Regional Union—illustrating diverse models of smart and digital settlement practices. These examples provide insight into how digital governance and community engagement intersect at the local level to promote sustainability and regional competitiveness.
Methodology and Selection Rationale
The case studies were selected based on diversity in settlement size, governance structure, and policy focus. Nagypáli represents an ecological and innovation-driven small village; Ceglédbercel exemplifies suburban mobility and safety-oriented smart infrastructure; Tamási illustrates an integrated urban development approach, while the Northern Hegyháti Micro-Regional Union demonstrates inter-municipal cooperation for regional development.
Data were collected from official municipal reports, local strategy documents, and publicly available evaluations between 2018 and 2023. Each case was analyzed along four dimensions: (a) local context and development objectives, (b) implementation and results, (c) fiscal and social impact, and (d) sustainability and governance lessons. This structure ensures comparability and highlights key policy lessons emerging from Hungary’s digital settlement experiments.
Case Studies
Nagypáli—Smart Village and Sustainable Governance
Nagypáli, a rural settlement in Zala County with around 700 inhabitants, has become a well-known model of small-scale smart village development. The municipality’s strategic plan integrated environmental, social, and economic objectives, emphasizing renewable energy, community participation, and local innovation.
Through EU co-funded projects, Nagypáli implemented renewable energy systems, digital administration tools, and community-based planning. Citizen satisfaction with local public services increased by 20%, while over half of residents engaged in digital service use. The project’s small financial framework (around HUF 15 million ~. 45,600 USD) nevertheless produced measurable social benefits through participatory governance and reduced administrative costs. The Nagypáli case demonstrates how community-scale innovation can effectively operationalize smart village principles, aligning environmental sustainability with digital governance (Ahvenniemi et al., 2017; Komninos, 2013).
Ceglédbercel—Smart Mobility and Community Safety
Ceglédbercel, a suburban municipality of approximately 2,500 residents near Budapest, focused its digital development on smart mobility and climate-conscious planning. The local Smart Traffic Program introduced intelligent pedestrian crossings (“smart zebras”) and expanded cycling infrastructure, reducing local traffic accidents and increasing cycling use by 30%.
The total investment (HUF 25 million ~. 76,000 USD) combined EU and national funding and involved significant community engagement, including participatory planning sessions and citizen feedback mechanisms. Complementing this, the Sustainable Energy and Climate Action Plan integrated smart mobility and energy efficiency goals into a long-term urban resilience strategy. Ceglédbercel thus exemplifies how digital infrastructure can serve as a catalyst for civic participation and sustainable local governance (Bănică et al., 2021).
Tamási—Integrated Urban and Digital Development
Tamási, a medium-sized town of about 11,000 inhabitants in Tolna County, adopted a comprehensive approach to sustainable urban development. Under the TOP Plus framework, the municipality prepared its Sustainable Urban Development Strategy and launched a pilot “Settlement Probe” (Településszonda) program to integrate data-driven decision-making into local planning.
The project, with a budget of approximately HUF 50 million (152,000 USD), combined green infrastructure renovation, digital education programs, and participatory governance. Citizen satisfaction increased by 25%, and digital education initiatives reached 70% participation among students. Although initial expenditures were higher, long-term economic efficiency improved due to better coordination of urban services. The Tamási example illustrates how medium-sized towns can embed smart governance within existing urban development frameworks (Malecki, 2018; Meijer & Bolívar, 2016).
Northern Hegyháti Micro-Regional Union—Smart Region Cooperation
The Northern Hegyháti Micro-Regional Union in Baranya County brought together several small municipalities to implement cooperative smart region initiatives. Its goals included: developing shared waste management systems, energy efficiency projects, and community spaces. The program emphasized social planning and participatory governance, resulting in 12% cost savings and 50% citizen participation in community programs.
This initiative showcased how inter-municipal cooperation can compensate for limited administrative capacity and financial constraints in rural areas. While budget data were limited, the program’s governance outcomes—particularly strengthened social cohesion and collaborative management—demonstrate the potential of “smart regions” to institutionalize cooperation and collective innovation (Bulu, 2014; Horváth, 2021).
Comparative Analysis
A comparative examination of the four cases highlights the heterogeneity of Hungary’s digital settlement practices but also their shared drivers of success. The key factors can be grouped under three dimensions:
“Local capacity and leadership:” Successful initiatives (e.g. Nagypáli and Tamási) benefited from stable municipal leadership and administrative commitment. Smaller municipalities faced resource constraints, limiting the depth of monitoring and transparency (Výrostová & Nyikos, 2023).
“Community engagement and social innovation:” Projects that actively involved citizens—such as Nagypáli’s participatory planning and Ceglédbercel’s climate initiatives—achieved higher satisfaction and stronger sustainability outcomes (Cardullo & Kitchin, 2019).
“Institutional learning and regional integration:” Multi-level cooperation, as in the Hegyháti Union, provided economies of scale and knowledge exchange, while isolated pilots risked discontinuity after funding cycles ended.
However, challenges persist. Limited fiscal impact data and insufficient long-term evaluation mechanisms constrain policy learning and accountability (Scheppele & Morijn, 2025). Many municipalities lack standardized monitoring indicators, resulting in fragmented data and weak replicability of good practices. These issues underline the need for capacity-building and national-level coordination to ensure the institutional sustainability of local innovation.
Synthesis and Policy Implications
The Hungarian case studies demonstrate that smart settlement development is most effective when digital technologies are embedded within broader community and governance frameworks. Local adaptation, citizen participation, and inter-municipal collaboration emerge as decisive factors for sustainable success. Conversely, limited administrative capacity, fragmented governance, and the absence of long-term monitoring reduce impact and hinder the diffusion of innovation.
From a policy perspective, three lessons stand out:
“Local adaptation:” Smart development must align with local socioeconomic contexts, balancing technological ambition with practical feasibility.
“Participatory governance:” Digital tools can only generate value when they enhance civic engagement and co-creation.
“Integrated regional policy:” Coordinated frameworks—such as micro-regional unions—can amplify small municipalities’ innovation capacity.
In conclusion, the Hungarian experience illustrates that digital and smart settlement policies are not merely technological modernization efforts but instruments of social renewal and territorial cohesion. Strengthening evaluation systems, promoting transparency, and embedding digitalization within participatory governance models remain crucial for translating pilot projects into lasting, scalable development strategies (Gellén, 2025; Horváth, 2021; Komninos, 2013).
Comparative Table of Hungarian Smart and Digital Settlement Case Studies.
Pilot programs in Hungary clearly demonstrate that innovative local development initiatives can enhance the efficiency of public service delivery, improve citizen satisfaction, and strengthen community participation. Given the diverse challenges and resource capacities of the examined municipalities and regions, tailoring programs to local contexts proved essential for successful implementation. The four pilot programs shared common objectives: improving the quality of local public services, fostering community engagement, and ensuring both social and fiscal sustainability.
However, data availability regarding budgetary impacts, sustainability outcomes, and project follow-up was often limited. In smaller municipalities, such as Nagypáli and Ceglédbercel, local governments frequently lack the professional staff necessary to systematically document and disseminate project results. Moreover, the experimental nature of pilot programs means that outcomes are often preliminary or uncertain, discouraging full public reporting. In the absence of legal obligations, disclosure of small-scale initiatives largely depends on local discretion.
The availability of fiscal and sustainability data is further constrained by the complexity of long-term measurement, short implementation cycles, and the absence of clearly defined indicators during the planning phase. Data were often collected for internal evaluation or audit purposes and were not made publicly accessible. Similarly, information on project continuation and efficiency is limited due to the temporary nature of pilots, lack of systematic monitoring mechanisms, and financial or legal barriers.
Overall, these information gaps stem from structural and contextual factors: limited administrative capacity in small municipalities, the short-term and experimental orientation of pilots, the absence of mandatory reporting or standardized monitoring, the long-term nature of sustainability and fiscal assessment, and obstacles to continuation and evaluation. Such limitations are common in Hungarian local development projects and underscore the need to strengthen monitoring systems and public reporting to ensure that experiences from local innovation are transferable.
Comparative analysis of cases in Veszprém, Pilisvörösvár, and Budapest illustrates good practice in transparent and accountable urban development. These municipalities demonstrate detailed online documentation, cost–benefit analyses, multi-dimensional sustainability indicators, continuous monitoring, and measurable efficiency metrics. In contrast, weaker practices are characterized by limited disclosure, partial or absent fiscal assessments, short-term focus, lack of project continuation, and inconsistent indicators, often reflecting small municipal size, limited expertise, and institutional or political instability.
Key determinants of success include municipal size and human capacity, project scope and purpose, funding and institutional support, political and organizational stability, and the existence of monitoring systems and indicators. Effective and sustainable local development emerges where municipalities possess sufficient human and financial resources, stable political support, long-term strategic vision, and robust monitoring systems based on measurable indicators. Conversely, weak or incomplete practices are associated with limited administrative capacity, short-term pilot orientation, lack of systematic monitoring, and political or institutional instability.
Overall, the pilot programs examined illustrate both the potential and limitations of local innovation, offering valuable lessons for future evidence-based and participatory local governance in Hungary.
Comparison of Good vs. Weak Practices in Hungarian Local Development (Based on the autors’ own original data).
Results of the Research
Three main lessons emerge from Hungarian smart settlement development experiences:
Success depends on local adaptation: Smart developments are sustainable when aligned with the settlement’s size, economic structure, and social culture.
Community participation is essential: Digital technologies alone do not produce social development; citizen involvement, training, and motivation are necessary.
Regional integration strengthens impact: Networked application of smart solutions—for example, in micro-regional collaborations—can mitigate rural disadvantages and generate new innovation potential.
These examples demonstrate that in Hungary, smart settlement development is no longer a vision but a real, bottom-up process combining technological modernization with social innovation.
Regarding the Research Questions, the following responses can be given.
How do Digital Technologies Contribute to Increasing Social Cohesion, Innovation Capacity, and Competitiveness in Settlements and Regions?
Empirical findings from the Hungarian cases demonstrate that digitalization strengthens social cohesion primarily when embedded in community participation and local knowledge. In Nagypáli and Ceglédbercel, smart governance and citizen co-design processes led to higher satisfaction levels and stronger collective engagement. The integration of digital administration tools, renewable energy systems, and participatory planning enhanced both local identity and institutional efficiency. Furthermore, the digitalization of local businesses and public services contributed to workforce retention and improved competitiveness in peripheral areas.
How do Smart Solutions Shape Local Governance, Citizen Participation, and Public Service Quality in Hungarian Settlement Practices?
Smart initiatives in Hungary have begun to transform local governance from bureaucratic to data-driven models. In Tamási, the “Settlement Probe” (Településszonda) introduced evidence-based urban management and participatory governance, leading to a 25% increase in citizen satisfaction. Similarly, the Northern Hegyháti Micro-Regional Union exemplifies how inter-municipal cooperation enhances administrative capacity and efficiency. These examples underscore that technology serves as a catalyst for participatory democracy when local governments institutionalize transparency, feedback, and shared decision-making.
Conclusion and Implications
Overall Conclusions
Digital and smart settlement development is one of the most dynamically evolving areas of 21st-century regional policy, combining technological, economic, and social innovation. The study highlighted that the success of smart settlements depends not only on the presence of digital infrastructure but also on the harmonious cooperation of human, community, and institutional factors. Technology becomes a true development tool only when local societies can adapt it to their needs and values.
Internationally, smart city and smart village initiatives are increasingly shifting from technocratic approaches toward human-centered development policies. The EU’s “Digital Decade” strategy emphasizes that digitalization should promote economic growth, social inclusion, and sustainable quality of life. In Hungary, this approach is implemented through the DWP and the DSP, aiming to support rural catch-up, strengthen digital competencies, and encourage local innovation.
Hungarian case studies—Nagypáli, Ceglédbercel, Tamási, Kiskőrös, and Zalaszentgyörgy—demonstrate that smart developments can open new development pathways for rural settlements. Nagypáli’s energy independence model, Ceglédbercel’s digital community platforms, and Tamási’s geothermal and e-governance developments illustrate how technology can be embedded in local social structures and contribute to reducing regional inequalities in the long term.
However, the study also emphasizes that digitalization creates new challenges: data protection, digital skills gaps, and social inequality remain critical issues. The future sustainability of smart settlements requires open, inclusive, and adaptive governance models, with decision-making based on partnership and community trust.
Overall, digital settlement development in Hungary is not merely a tool of modernization but a key driver of social renewal and regional competitiveness. Smart villages and cities are forming a new type of regional identity, where technology, community, and sustainability mutually reinforce the livability and resilience of future settlements.
Financial Conclusions
From a financial perspective, Hungary’s smart settlement programs reveal a dual effect of digital transformation:
At the macroeconomic level, digital transformation contributes to reducing regional disparities and enhancing local competitiveness. However, to ensure fiscal sustainability, systematic cost–benefit analyses and performance monitoring must become integral to EU-funded development programs.
Ultimately, digitalization emerges as both a social and financial investment: while initial expenditures are substantial, the long-term returns—manifested in administrative efficiency, energy savings, and human capital development—underscore its viability as a sustainable public policy strategy.
Footnotes
Acknowledgements
We would like to thank Natalia Ermasova and Erika Ceka from Governor’s State for their support and Professor Ali Farazmand (FAU) for his relentless inspiration.
Ethical Considerations
The research fully complies with all applicable ethical standards.
Consent for Publication
We declare our consent for the publication of this article.
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Data Availability Statement
All data presented in this article are appropriately referenced.