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on European Economics |
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Issue of 2026–04–27
nine papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Filippin, Maria Elena (Central Bank of Ireland); Pelli, Michele (Central Bank of Ireland) |
| Abstract: | Trust is a central element of monetary and payment systems, and it plays a particularly important role when assessing the prospects for the digital euro. Ireland’s digitally advanced payment landscape provides useful context for understanding how households view the potential for digital euro adoption. Across the euro area, Irish respondents are the fourth most likely to report being willing to use the digital euro, with trust in the euro and institutions strongly associated with adoption intentions. While 90% of Irish respondents view the traditional form of physical euro positively, digital euro awareness remains below the euro area average (at 49%), highlighting the need for enhanced public communication as the project progresses. Digital euro awareness and adoption intentions within Ireland vary modestly across demographic groups, with men, older respondents, and the financially literate showing consistently higher awareness, willingness to adopt, and emphasis on key features such as security and business acceptance. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:stafin:2/si/26 |
| By: | Joseph Kopecky (Department of Economics, Trinity College Dublin) |
| Abstract: | As major powers deploy trade policy as coercion, what fiscal capacity does a currency union need to sustain a credible collective response? I embed the multi‐sector trade model of Caliendo and Parro (2015) into a monetary union with heterogeneous members, calibrated to the world input‐output database (WIOD) for 20 individual Eurozone members. A US tariff escalation of 20% plus EU retaliation requires 0.69% of Eurozone GDP (€97 billion); a Chinese critical minerals restriction requires 0.44% (€62 billion); both simultaneously require 1.12% (€157 billion). A substantial share of the fiscal need arises from the asymmetric costs of collective action itself: the costs that EU counter‐tariffs impose on members with concentrated trade exposures. This reframes the fiscal requirement as the price of strategic credibility. Single market deepening generates welfare gains, but barely reduces the fiscal requirement, showing that integration and fiscal capacity are complements. Joint borrowing is needed, as budget‐balanced redistribution cannot sustain collective action. However, the headline fiscal requirement is an upper bound. Embedding the model in existing EU institutions (cross‐conditionality of EU fiscal flows and qualified majority voting rules) reduces the practical requirement to 0.33% of Eurozone GDP (€46 billion) in the combined scenario, since the EU need only compensate a handful of pivotal large members to prevent a blocking minority. |
| Keywords: | Fiscal unions, currency unions, trade policy, economic coercion, Eurozone, strategic autonomy |
| JEL: | F13 F15 F42 F45 E62 H77 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:tcd:tcduee:tep0426new |
| By: | Pakrooh, Parisa; Manera, Matteo |
| Abstract: | Despite the strong commitment of European countries to achieve net-zero emissions by 2050, the extent to which key policies and drivers jointly shape emissions dynamics remains insufficiently investigated. To fill this gap, the study investigates the combined effects of the circular economy, energy transition, emissions trading systems, carbon tax, and digitalization on carbon reduction in the EU member states. Using annual data from 2000 to 2023, the analysis integrates causal discovery, time-varying dependence modeling, and machine learning methods to unravel system-level causal structure, dynamic connectedness, and future emission trajectories. The Directed Acyclic Graph method, especially the Fast Adjacency Skewness algorithm, identifies both contemporaneous and lagged causal relationships, in which resource productivity acts as a transmission channel within the system. Lagged disequilibrium shocks propagate from upstream circular economy factor (material footprint) and digitalization to midstream efficiency (resource productivity), and ultimately are transmitted to emissions. Time-varying copula models confirm significant heterogeneity and evolving dependence among key factors, highlighting the nature of the dynamic relationships. Forecasting results, based on a Support Vector Regression model under the European Union’s 2030 climate policy target, indicate a persistently declining emission trajectory, however at an insufficient speed to meet the EU’s 2030 target. Sensitivity analysis indicates that this gap does not reflect a policy failure but the need for accelerated policy adjustments. |
| Keywords: | Climate Change, Resource/Energy Economics and Policy |
| Date: | 2026–04–14 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:396442 |
| By: | Maier Sofia (European Commission - JRC); De Poli Silvia; Klenert David (European Commission - JRC); Amores Antonio F (European Commission - JRC); Dreoni Ilda (European Commission - JRC) |
| Abstract: | This article introduces Green EUROMOD, the environmental extension of the EU’s tax-benefit microsimulation model EUROMOD. It provides a novel framework for evaluating the distributional, environmental, and fiscal impacts of green policy reforms across the 27 EU Member States. The model captures both direct greenhouse gas (GHG) emissions - such as those arising from household fuel combustion for heating and private transport - as well as indirect emissions occurring along value chains. Indirect emissions are further disaggregated into those embodied in domestically produced goods and services, and those embodied in imports from other EU Member States and the rest of the world. This granularity, combined with the capacity to simulate environmental and tax-benefit policies jointly and consistently across countries, makes Green EUROMOD a unique tool for the design and assessment of environmental policy reforms, with a particular focus on their distributional effects. The article outlines the model’s components and methodological framework, followed by a demonstration of its capabilities through two applications. First, we present the estimated household carbon footprints from consumption across the income and GHGemissions distribution, for the 27 EU countries. Second, we assess the extent to which GHG emissions are already implicitly priced by existing value-added and excise taxes. This provides new policy insights regarding the current baseline which future carbon pricing policies need to consider, as well as the relative performance of Member States in balancing green and fair objectives with their current consumption tax structures. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202604 |
| By: | Antonio Abatemarco (University of Salerno); Giuseppina Autiero (University of Salerno); Claudia Avossa (University of Salerno) |
| Abstract: | Between-country GDP inequality in Europe declined markedly from the early 1990s to the eve of the global financial crisis, but this convergence has since stalled and partly reversed, pointing to a structural change in the macroeconomic forces shaping cross-country disparities. This paper investigates the contribution of macroeconomic factors to that evolution by decomposing between-country GDP inequality into expenditure-side components, income-side components, and demographic and productivity-related channels. Using annual OECD National Accounts data for 17 European countries over 1990–2024, we implement a non-parametric two-stage decomposition strategy that combines a counterfactual Shapley procedure with a Shorrocks factor decomposition. The estimation strategy we propose provides an exact accounting of inequality in terms of interpretable factor contributions, separates demographic effects from per-capita GDP dynamics, and is well suited to settings in which macro aggregates are jointly determined. Our findings show that the decline in inequality up to the late 2000s was largely driven by wage- and consumption-led convergence, underpinned by narrowing productivity gaps. Since the 2000s, however, growing dispersion in exports has increasingly acted as the main source of divergence, while profits have progressively replaced wages as the main income-side channel through which productivity differences translate into inequality. These results suggest that, in a changed macroeconomic environment, reducing between-country inequality requires not only policies that reconnect wage growth to productivity and sustain domestic demand, but also interventions on the profit side and greater coordination of external balances. |
| Keywords: | between-country inequality, GDP decomposition, Shapley value, functional income distribution, global imbalances |
| JEL: | D63 E01 O47 F32 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2026-693 |
| By: | Alex Pienkowski; Valentina Semenova; Ian C. Stuart; Yuntian Lu |
| Abstract: | European governments face tight fiscal constraints amid rising debt and mounting demands from aging, health, defense, and climate spending, while scope to raise taxes is limited. This paper benchmarks the distributional efficiency of non-old-age social protection across Europe using harmonized EU-SILC microdata: defining efficiency as the reduction in the Gini coefficient per euro of transfers. We estimate an efficiency frontier and document large cross-country dispersion: countries with similar spending levels achieve markedly different inequality outcomes. Moving toward the frontier implies potential savings of about 0.7 percent of GDP on average. Complementing this cross-sectional lens, we examine how inequality reduction changes with each additional euro of transfers as coverage extends beyond poorer households. We show that marginal gains typically decline and can eventually turn negative, helping to identify spending components with limited distributional payoff. While social protection serves many important objectives beyond redistribution, our metric provides a transparent, comparable benchmark for assessing where fiscal space may be created with minimal impact on inequality and poverty. |
| Keywords: | Inequality; fiscal incidence; expenditure; redistribution; survey data |
| Date: | 2026–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/078 |
| By: | Nieto, María J.; Papathanassiou, Chryssa |
| Abstract: | This paper studies the effectiveness of risk management, one of the two channels identified by the Network for Greening the Financial System (NGFS, 2024) as those through which the financial system contributes to physical risk adaptation in the European Union (EU). We assess the efficacy of Level 3 prudential regulations in encouraging banks to include physical risk adaptation in their risk management and client engagement strategies. Our analysis adopts a broad perspective, encompassing not only prudential risk management but also, and in our view more importantly, prudential transparency regulation, given the positive leverage that stakeholders can exert to incentivise adaptation efforts. Our findings suggest that banks should consistently integrate physical risk adaptation into their stress tests, transition plans and Pillar III disclosures. Transition plans must address physical hazards, exposure and vulnerability and must set adaptation targets. Adaptation measures should be treated as risk mitigants reflected in losses given default (LGDs), with the severity and consistency of those losses being reflected in transition plans and stress tests. JEL Classification: K23, O52, Q54, Q58 |
| Keywords: | adaptation, EU, physical risks, regulation |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2026386 |
| By: | Casas Pablo (European Commission - JRC); Fernandez Macias Enrique (European Commission - JRC); Martinez Plumed Fernando; Gomez Emilia (European Commission - JRC); Gonzalez Vazquez Ignacio (European Commission - JRC); Salotti Simone (European Commission - JRC) |
| Abstract: | Generative AI is reshaping what artificial intelligence can do in the workplace, calling into question pre-GenAI assessments of which workers and tasks are most exposed. In this paper we trace the evolution of AI exposure in the European labour market from 2008 to 2024 by linking 352 AI benchmarks to 14 cognitive abilities, 108 work tasks and 127 ISCO-3 occupations, weighting benchmarks by their research intensity in the AI literature and thus deriving AI exposure by cognitive ability. Bundling work tasks into occupations based on intensity indicators, we explore occupational exposure to AI. We find that the cognitive abilities most exposed to the recent surge of AI research are ideas-related, such as attention and search, comprehension and expression and logical reasoning. Because the associated information processing and problem-solving tasks are the most transversal across occupations, we find an exponential increase in AI exposure across all occupational categories of workers, even though comparatively high-skilled occupations are more exposed than elementary occupations. This points at a substantial and transversal labour market impact of AI. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:laedte:202602 |
| By: | Golo Henseke |
| Abstract: | Generative AI diffuses at pace across European workplaces, but unevenly. Using the 2024 European Working Conditions Survey of more than 36, 600 workers across 35 countries, we examine who adopts generative AI and whether early adoption has begun to reshape the task content of jobs. Adoption averages 12\% but ranges from under 3% to 25% across countries. Although occupational exposure strongly predicts uptake, AI does not diffuse passively along exposure lines. At the worker level, individual skills, non-routine cognitive job content within occupations, and employee say in organisational decisions steepen the exposure-adoption gradient; at the country level, so do digitalisation and workplace training provision. A gender gap persists, concentrated in the most exposed occupations. A shift-share design finds no detectable effect of early adoption on worker-reported technology-related task restructuring, consistent with a transitional phase in which AI is fitted into changing work processes rather than actively reshaping them. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.18849 |