Technological Transformations and Global Value Chains: Strategic Challenges for Europe and Its Territory

Over the past decade, Europe faced multiple challenges that have already caused structural changes in the way regional growth patterns have been taking place. Among many, these challenges include a substantial restructuring of Global Value Chains, with a reversal of the process of offshoring production towards the EU, and the technological transformations induced by the pervasive diffusion of Industry 4.0 and the digital service economy. Both challenges exert effects that are ex ante expected to be intertwined with other driving forces, most notably related to the structural changes associated with the COVID-19 restrictions, and the presently ongoing Russia-Ukraine conflict. Thus, the well-entangled nature of these challenges makes it hard to separate out their net impacts at the local level. The aim of this paper is to simulate the net effects of technological transformations and global value chains, and isolate their local effects on GDP growth, thanks to a regional macro-econometric forecasting model, called MAcroeconometric, Social, Sectoral, Territorial model in its fifth version (MASST5). Results are presented against the backdrop of a reference scenario, modeling both the long-run trends characterizing the EU economy over the past decade, as well as the long-lasting consequences of both COVID-19 restrictions, and the presently ongoing Russia-Ukraine conflict. Results hint at a remarkable spatial heterogeneity of the impacts of these challenges, both in absolute terms, as well as in terms of regional disparities.