This study explores exposure to artificial intelligence (AI) technologies and employment patterns in Europe. First, we provide a thorough mapping of European regions focusing on the structural factors—such as sectoral specialisation, R&D capacity, productivity and workforce skills—that may shape diffusion as well as economic and employment effects of AI. To capture these differences, we conduct a cluster analysis which group EU regions in four distinct clusters: high-tech service and capital centres, advanced manufacturing core, southern and eastern periphery. We then discuss potential employment implications of AI in these regions, arguing that while regions with strong innovation systems may experience employment gains as AI complements existing capabilities and production systems, others are likely to face structural barriers that could eventually exacerbate regional disparities in the EU, with peripheral areas losing further ground.

@en

Since Leontief’s (Leontief 1953) seminal work on the factor content of trade, the validity of the Heckscher-Ohlin-model has been judged not only on the basis of formal tests of the theory but also tested against prior expectation. In this vein, this paper uses the Heckscher-Ohlin-Vanek (HOV) approach to investigate whether supposed US leadership in the digital domain can be traced back to digital task endowments embodied in labour services. In a comparison between EU member states and the US, we find that the latter is more intensive in digital tasks than the EU and that this difference is explained by both an intensity-effect (US occupations being more digital-task intensive) and a structural component (relatively more digital-task intensive occupations). Viewed through the lens of the HOV theorem we find that the US is abundant in digital tasks relative to non-digital tasks, while the opposite is true for the EU. The standard tests for the predictive power of the HOV theorem are high and in line with the results for labour in previous literature.

@en

This paper revisits the Heckscher-Ohlin-Vanek (HOV) theorem and investigates its fit for digital tasks and ICT capital, which both represent endowment factors that are expected to shape the digital transformation. We use a theory-consistent methodology for calculating the measured net factor content of trade and apply it to a unique dataset on digital and non-digital tasks performed in detailed occupations, as well as recent data on ICT capital stocks. Equipped with these data, we provide new evidence on the factor-based trade patterns for 25 EU countries and use it to test the HOV theorem. Overall, the performance of the sign test and the rank test is good, if not impressive. In 83% of the cases, countries are net exporters of those factors with which they are abundantly endowed, with a higher score achieved for digital tasks than for ICT capital. The relevance of digital tasks and ICT capital is corroborated by a gravity model, which indicates that higher endowments with these factors foster bilateral exports.@en

We estimate the effects of a European Carbon Border Adjustment (CBA) mechanism on exports, real GDP, welfare and emissions using the multi-region, multi-sector structural gravity model of Larch and Wanner (2017). Incorporating the main industries covered in the proposal of the European Commission from mid-2021, as well as its other design features, and assuming prevailing CO2 prices, we find only small effects of the European CBA mechanism. EU exports are estimated to decline by 0.04%, while CO2 emissions in EU countries increase by 0.24%. These negligible results mask larger adjustments at the sectoral level. The structural changes will shift the EU economy towards more emission-intensive industries, which will make achieving its climate goals harder. On the positive side, the European CBA mechanism will reduce global emissions by 0.08%. Given the minute economic costs in terms of GDP and welfare losses, the CBA mechanism seems an appropriate policy tool, though its proposed design will not be able to make a significant contribution to mitigating global climate change.@en

This paper addresses the ‘smile curve hypothesis’ which suggests that the potential for generating value added varies significantly across the value chain with the production stage being the least promising segment. Based on granular greenfield FDI data a metric is developed that allows capturing the functional specialisation of countries in global value chains at the industry level. The measure not only provides new insights into the specialisation of countries as ‘factory economies’ or ‘headquarter economies’ but is also used to test and confirm econometrically the smile curve hypothesis by showing that countries specialised in the production stage of the value chains tend to generate less value added per unit of output produced than those specialised as headquarter economies.@en

This chapter reviews the industrial policy in the European Union in the light of the revived interest in the subject and the most pressing challenges ahead. In the current global context these challenges are (i) to keep pace at the technology frontier with the technologically most advanced economies; (ii) to meet the challenges of fast catching-up emerging economies; (iii) to contribute to the convergence and cohesion processes within the European Union; and (iv) to deal with climate change and environmental sustainability issues more generally. A quantitative exercise that makes use of the European Union’s budget data, including the structural funds, and member states aid expenditures, is used to identify the European Union’s current industrial policy priorities. The results are the basis for an assessment of the extent to which the key challenges are addressed at the supranational level and which aspects are primarily dealt with by national governments.@en

This paper investigates empirically the relationship between specialisation in the production of tradable output and the current account balance. According to the ‘tradability hypothesis’ that is examined, countries that specialise in highly tradable sectors tend to run current account surpluses while countries with dominant non-tradable sectors risk running current account deficits. In order to test this hypothesis empirically we develop a value-added based tradability index which captures the tradability of a country’s output. Applied to a large sample of European countries, our empirical model provides strong evidence in favour of the tradability hypothesis. The main policy implication is that the anxieties about ‘de-industrialisation’ in large parts of Europe seem justified with a view to growing external imbalances.@en

Despite the proclaimed return of industrial policy state aid provided by EU Member States is at historically low levels. This fact is at least partly explained by the unique institutional arrangement in the EU which empowers the European Commission to monitor and restrict state aid activities of Member States. Making use of European state aid statistics over the period 1995–2011 we construct a measure for manufacturing state aid and estimate an expanded macro-economic export function to investigate the relationship between state aid for the manufacturing sector and Member States’ export performance. Since national governments can be expected to provide subsidies primarily to foster domestic value added we use value added exports as the export performance measure. Non-stationarity of the data confines us to investigating the short run relationships in which we only find limited evidence for a significant impact of state aid on manufacturing value added exports.@en

The technology club literature suggests a tripartite segmentation of countries into an innovation, an imitation and a stagnation club. We use a Benhabib–Spiegel type growth model embedded in a threshold regression framework to test for non-linearities in the impact of the technology gap on economic growth as suggested by the technology club hypothesis. Using human capital as the threshold variable we are able to identify three country groupings. In line with the technology club hypothesis we find the strongest effects of the technology gap on economic growth in the intermediate group which we associate with the imitation club.@en

In this paper we provide detailed evidence on the performance of exporters compared to non-exporters in Austrian manufacturing industries based on firm-level data. The centrepiece of the study is the issue of the export premium, i.e. the size and productivity advantages of exporting firms compared to their purely domestic peers. We present evidence for the existence of sales, labour productivity and wage premia. These results are largely in line with the results found for other European countries. Furthermore we document the existence of large differences in these premia across industries and provide explanations for this finding. Our results are robust with regards to including additional firm control variables such as employment and R&D-related variables though the magnitudes of the export premia become much smaller. We also propose a new interpretation of the export premium estimation with firm fixed effects which we interpret as a result on export switchers. Finally, we employ a probit model to document the importance of sunk export costs for the decision to export.@en