Integrating digital and global transformations in forecasting regional growth: the MASST5 model

Abstract

ABSTRACT During the past decade, world economic development was coupled with disruptive challenges. Among them, digitalisation and new forms of globalisation represent a potential threat for economic growth opportunities and for the future of labour markets. Digital transition calls for the assessment of the impact of robotisation and digitalisation on skill composition, employment levels, productivity and growth dynamics. In turn, the largest wave of globalisation after that taking place before the First World War caused, first, the emergence of global value chains and, more recently, their disintegration with partial mechanisms of reshoring, with consequences for growth and employment opportunities. All these challenges call for comprehensive approaches to their modelling. This paper presents the main advances introduced in the fifth generation of the MAcroeconomic, Sectoral, Social, Territorial (MASST5) model, which carved a relevant niche in the empirical literature on macro-econometric regional growth, and has now been strengthened to model future digitalisation transitions, as well as the national and regional breakdown of the way global value chains will reorganise. A longer time series, especially in the regional submodel, also allows one to take the major changes taking place in Europe following the 2007–08 financial crisis, and the 2020 COVID-induced contraction into account.