EU Economy Research Articles

Comparative assessment of the progress of employee financial participation in the member states of the EU

PurposeThis article provides an overview of the different measures promoting EFP schemes that are in place across the EU-27 and the United Kingdom and classifies Member States according to a “success score” given to each measure. “Success” is measured by the degree to which both soft and hard criteria have contributed to promotion of EFP in different countries.Design/methodology/approachThe article assesses the progress of EFP in EU 27 and the UK using three indicators: (i) legal framework, (ii) fiscal incentives and (iii) political support and social dialogue to obtain an overall score for each country both for ESO and PS. Countries are then grouped into clusters, showing that a significant number of countries have made progress in the spread of both ESO and PS.FindingsESO is much less frequently used in Europe than e.g. in the US. If this still largely unexploited potential is to be harnessed, further development of financial participation, ESO in particular, should be part of an overall European strategy for stimulating sustainable and inclusive growth of the EU economy. A generally favourable attitude in some countries has usually led to supportive legislation for EFP schemes, which, in turn, have led to the spread of these schemes. Tax incentives are important tools for enhancing and broadening financial participation. When properly designed, they promote the spread of EFP effectively.Originality/valueAssessing the progress of EFP schemes in EU 27 and the UK using the three indicators (i) legal framework, (ii) fiscal incentives and (iii) political support and social dialogue, we obtain an overall score for each country both for ESO and PS and compare it with those produced in 2014. We can show that in as many as twelve countries, i.e. 44% of MS, there was a positive change in their overall score between 2014 and 2024.

A Panel Cointegration Analysis of Pakistan’s Trade: Linkages with Regional and EU Economies

A Panel Cointegration Analysis of Pakistan’s Trade: Linkages with Regional and EU Economies

War shock and the economy

AbstractThe main features of war shock are substantially different from those of the preceding COVID-19 shock. The EU economy is showing important elements of resilience. The existing structural forces and adaptive capacity of the EU economy are clear indications that it is capable of transformation and avoiding recession.The dynamics of the war is also crucial in terms of economic impacts. There are still many uncertainties about the future course of the war and its ramifications. The fundamental question is whether the war is heading in the direction of escalation or de-escalation. Unless the war spreads beyond Ukraine and the conventional means of warfare, its global economic consequences may be limited after the initial shock. New adjustment processes in the field of green and digital transition can be set in motion in parallel with the suffering and turmoil of war shock. New market players could emerge in the energy markets.The prolonged war continues to challenge the Ukrainian economy, but it can remain viable with massive external support. The Russian economy could suffer serious erosion, with its comparative advantage being wasted.There is a real threat of deglobalisation and the emergence of a fragmented world economy, but the counteracting factors appear to be much stronger. However, the prolonged war continues to pose major and unpredictable threats to the countries affected directly and indirectly, to Europe and to the world economy.

The application of a panel PLS-SEM model to determine the relationship between the institutional factors and the innovativeness of EU economies

The ability of domestic enterprises to invent, introduce and diffuse innovations has been a driving force of the development of modern economies. This paper focuses on the institutional determinants of innovativeness of European Union economies. Institutions are defined as a universal, relatively persistent set of social norms rooted in society, shaping both human behaviour and all relations in the economy. The institutional factors seem to be especially significant nowadays, in an era dominated by the open innovation model. The aim of the study discussed in the article is to measure the quality of institutions and the level of innovativeness of EU economies (26 EU economies, excluding Greece due to data deficiency) and to identify the relationship between these directly unobservable categories. The research applies the partial least squares structural equation modelling (PLS-SEM) method. On the basis of data for the years 2010 and 2020 extracted from Eurostat, Freedom House, the Fraser Institute, the Heritage Foundation and the Legatum Institute, a panel PLS-SEM model was constructed and an empirical analysis was performed. The latter demonstrates that the correlation between the quality of institutions and the level of innovativeness of EU economies was positive, strong and statistically significant both in 2010 and in 2020. Taking into account the theoretical aspects and the results of research of other scientists, this relationship might be considered not only as correlational, but also as causal.

Ukraine’s reconstruction in the context of EU accession

This paper outlines the impact of the war on Ukraine's economy, sets out the main challenges for reconstruction and EU integration, and provides a set of policy recommendations to "build back better" within the EU accession process. The economic and demographic shock caused by the war has been severe. However, we find that Ukraine can feasibly follow the EU-CEE EU integration path once the war ends, and that it will bring a great deal to the EU. Ukraine will not create an unmanageable extra strain on the EU budget, but the integration of its competitive agricultural sector must be carefully managed. Policy priorities for Ukraine and the EU include measures to mitigate the demographic shock, rebuild infrastructure in a way that integrates Ukraine more tightly into the EU economy, support the regions most impacted by the war, and use trade and FDI policies to maximise the benefits of EU integration.

The effects of higher gas prices on the EU economy: a computable general equilibrium modelling perspective

The effects of higher gas prices on the EU economy: a computable general equilibrium modelling perspective

IS ECONOMIC PERFORMANCE CONTRIBUTING TO ENVIRONMENTAL QUALITY? A CROSS-SECTIONAL ANALYSIS USING A GLOBAL DATASET

The European Green Deal strategy aims to decarbonize the EU economy and achieve ambitious sustainability goals. By evaluating and promoting environmentally sound development practices, the EU strives to lead by example and inspire global efforts towards a sustainable future. Moreover, The EU and OECD countries, alongside international frameworks, are committed to supporting vulnerable nations and advancing sustainable development worldwide. Through collaborative efforts and innovative policies, the EU and OECD aim to mitigate the impacts of climate change and pave the way for a more resilient and sustainable world. Analyzing the ecological sustainability of development patterns within the EU is integral to enhancing the EU's initiatives under the European Green Deal. In the opinion of the present study, the feasibility of European Green Deal needs further assessment from the perspective of a cost – benefits analysis, as the methodology employed in computing the costs involved raises several questions. This study underlines the multiple dimensions of environmental quality and proposes a methodology for building an aggregated index of environmental degradation. Subsequent analysis uses structural equations framework to investigate the impact of economic performance on environmental degradation index. Results are in line with previous findings in the field. Thus, present research has documented a positive and statistically significant impact of economic performances at macroeconomic level on the environmental degradation index. However, we also have shown that, while economic activity can contribute to environmental degradation, it can also drive positive environmental outcomes through technological innovation, investment in environmental protection, improved policies, sustainable consumption and production, creation of green jobs, and increased education and awareness. Thus, we have shown that, from a policy perspective, it is important to harness economic growth in ways that promote sustainability and environmental quality.

Phosphorus Flow Analysis in Lithuania

Substance flow analysis was used to analyze phosphorus (P) flows, accumulations and losses in Lithuania. P and phosphate rock are included in the list of EU critical raw materials, showing their importance for the EU economy, especially agriculture, and supply risks. It is important to minimize P losses as much as possible, avoid inefficient use, and maximize the potential of secondary P. The analysis showed Lithuania’s huge dependence on P imports, which occurred because one of the largest P fertilizer factories operates in the country, and the country also grows and exports a significant amount of cereals. In total, 69% of P addition to soil is from mineral fertilizers. The potential of secondary P is only partially used, mainly via manure, which constitutes 83% of the recycled P and adds 26% of P to agricultural soil. In total, 58% of P “waste” is either lost or accumulated, largely in phosphogypsum stacks. If this P was fully utilized, the country could reduce the current usage of mineral fertilizers by 71%; without P in phosphogypsum, the reduction would be just 7.2%. The P balance in Lithuanian soil is close to neutral. Agricultural leaching and erosion are the main reasons for P entering water bodies (78% of P) and, therefore, should be further reduced.

In Search of Sustainable Finance

Financial market is expected to play an important role in transition towards more sustainable setup of the business environment. The European Commission published the EU’s Strategy for Financing the Transition to a Sustainable Economy in 2021, requiring the inclusion of environmental, social and governance considerations into investment decision making. Yet, small, open EU economies, such as Slovakia, are in a specific position when implementing this legal framework. For instance, Slovakia does not have any meaningful stock market to speak of, although its bond and collective investment markets perform better. To assess the adoption of sustainable finance elements and to assess the convergence on the Slovak bond market towards standard practice, we investigated current practices on the corporate bond market of nonfinancial corporations. We conducted our research through a review of corporate bonds prospectuses published during 2020-22, in which, to assess current market practices, we examined and evaluated selected criteria and indicators related to issuers and bonds and compared them. These criteria include for example issuer´s business and purpose of finance, form, yield, security, or transferability of bonds. We find that relevant variable criteria and indicators related to reviewed bonds, compared in our research, are similar, indicating that the market converged into a standard practice. Finally, we find almost no evidence of adoption of the sustainable finance elements although there are hints of market uptake of sustainable practices.

Digitalization's contribution towards sustainable development and climate change mitigation: An empirical evidence from EU economies

The current study aims to test the usage of econometric and machine learning approaches to study the relationship between methane (CH4), a hydrocarbon component of natural gas, as a proxy of carbon emission, GDP as economic growth, financial development (FIN), and medium and high technologies as a proxy of information technology (ICT) and human development (HDI). This study observes two extended moderating effect models of human development index and financial development via medium and high technologies on carbon emissions over the 15-year periods from 2007 to 2021 for the 27 EU economies. Results indicate that when considered solely, ICT, economic growth, and HDI improve environmental quality and contribute to climate change mitigation, reducing methane emissions, whereas financial development seems to damage environmental quality. However, the crossed effects of ICT with HDI, and that of ICT with FIN, were considered in estimations, with results pointing out that those favorably affect climate change mitigation. Jointly considering ICT, HDI, and financial development proves to have a synergistic effect in promoting environmental health than each element on its own. Green and yellow countries were also identified revealing the countries for which a reduction and increase, respectively, in the value of methane emissions is predicted after three years. In the case of the entire panel, the STR (linear regression tree) algorithm predicts an average growth in methane emissions of around 3.64 %. Important policy directions are drawn considering the results obtained.

Sustainability-oriented management in the SMEs. A multilevel analysis in the European Union

This research focuses on SMEs in the EU and their acceptance of circular economy practices, with a special attention to the structural characteristics that might be significant drivers. Eight indicators of environmentally friendly practices are studied: water saving, energy saving, renewable energy, material saving, waste reduction, sale of waste materials, waste recycling, and eco-designed products. A sample of European SMEs from EU-28 data (countries at the time of the survey) is used to test hypotheses through eight multilevel probit regression models. Company- and country-level covariates are added to the multilevel models. The results showed that the number of employees, the business sector and the type of products/services sold have an impact on environmentally friendly practices. On the other hand, at the national level, per capita GDP and greenhouse gas emissions are the most relevant factors in the eight models. These findings are relevant for the implementation of the European Green Deal, which aims to increase resource efficiency through the transition to a cleaner EU and circular economy.

Believe me when I say green! Heterogeneous expectations and climate policy uncertainty

We develop a dynamic model where heterogeneous firms take investment decisions depending on their beliefs on future carbon prices. A policy-maker announces a forward-looking carbon price schedule but can decide to default on its plans if perceived transition risks are high. We show that weak policy commitment, especially when combined with ambitious mitigation announcements, can trap the economy into a vicious circle of credibility loss, carbon-intensive investments and increasing risk perceptions, ultimately leading to a failure of the transition. The presence of behavioural frictions and heterogeneity - both in capital investment choices and in the assessment of the policy-maker's credibility - has strong non-linear effects on the transition dynamics and the emergence of ‘high-carbon traps’. We identify analytical conditions leading to a successful transition and provide a numerical application for the EU economy.

The Economic and Socio-Cultural Impact of the Beauty Industry in the European Union

Abstract In recent years, the beauty industry has grown a lot and is now a big part of the economy in the European Union. This paper looks at how the beauty industry affects society and the economy. It talks about jobs, new ideas, consumer happiness, and economic growth. First, the paper gives an overview of the European beauty industry, including its size, structure, and main trends. Then, it discusses how the industry creates jobs, both directly and indirectly, in manufacturing, distribution, retail, and beauty services. The paper also talks about how the industry is good for innovation, such as developing new products, using technology, and making new marketing plans. Beyond the economy, it looks at how the beauty industry affects how people feel. It talks about how taking care of oneself can help people feel better about themselves and more confident. The paper also explores how the beauty industry influences culture and social norms, like fashion, beauty standards, and how people see beauty in society. Finally, the paper looks at the beauty industry’s contribution to the EU economy. It talks about how the industry helps with GDP, taxes, and investment from other countries. The paper also mentions how the industry supports new ideas, entrepreneurship, and economic growth in different regions

Why the EU risks missing its 2050 carbon neutrality target by focusing only on new (electric) car sales

In 2016, by signing and ratifying the Paris Agreement, the European Union committed to making the EU economy and society climate neutral by 2050. In 2016, partly because of this goal, the European Council endorsed an interim target of a 55% net domestic reduction in climate-changing gas emissions by 2030. The transport sector is among those called upon to make the greatest effort, both because of its percentage weight (25% of the EU's greenhouse gas emissions) and its progress to date (-10% from 1990 levels). Recent regulatory measures suggest that there is still much work to be accomplished to attain climate neutrality in the transportation sector. The paper examines the impact of vehicle emission performance stand- ards (443/2009/EC; 333/2014/EU; 2019/1242/EU; 2019/631/EU; 2023/851/EU) on the sup- ply and demand of cars in the EU automotive market and tests the consistency of the ongoing transformations with the Paris Agreement. Although changes in both production and purchase have been made in the direction desired (perhaps mandated) by policy makers, it appears that the scale of these is not meeting the required timeline. Much remains to be done to eliminate options, such as fuel decarbonization, which can effectively reduce the carbon footprint of the road fleet.

The Real-Time Impact of the War on Russian Imports: A Synthetic Control Method Approach

Abstract In response to the invasion of Ukraine, the EU and most other advanced economies imposed extensive sanctions on Russia, intending to harm its production capabilities and hinder its economic activities by restricting its access to international trade and financial markets. This paper develops an empirical framework based on the synthetic control method to assess the impact of the war and the following sanctions on bilateral and sectoral exports to Russia almost in real time. The war and the following sanctions reduced aggregate exports to Russia by a third between March and December 2022, with the effects being stronger for sanctioning countries than for non-sanctioning ones, albeit with substantial country-level heterogeneity within each group. Exports to Russia in high-tech sectors – relatively more targeted by trade sanctions – have been disproportionately affected.

Towards sustainable development in the European Union: a critical raw materials perspective

Sustainability is a key goal of the European Union, which is seen as a global leader of change in tackling climate change, as well as building green economic sustainability, leading to greater social prosperity. A milestone of sustainable development to support the European Union in achieving climate neutrality is the European Green Deal. Its initiatives aim to build a competitive and innovative EU economy while respecting and protecting the environment. According to current priorities, the European Union aims to become the first climate-neutral continent by 2050, thanks to critical raw materials. The purpose of this article is to analyse and assess the impact of critical raw materials on the sustainability of the European Union. The study uses a scoping review methodology and statistical analysis based on the Shapiro-Wilk test and Spearman correlation coefficient. The results show that critical raw materials are important for achieving sustainable development and implementing the EU economy towards climate neutrality. This paper contributes to the literature on sustainability. It can also provide important information for policymakers to understand how to shape green policies in the context of the strategic importance of critical raw materials in the transformation of an eco-innovative economy.

Dynamic effect of disaggregated level electricity generation on residential carbon emissions: Daily inference from the largest EU economies

This study examines the dynamic effects of electricity generation (EG) on CO2 emissions from the residential sector. The study focuses on the EU-4 countries (Germany, Spain, France, and Italy), considers residential CO2 emissions as the dependent variable, and includes disaggregated level fossil and renewable EG as explanatory variables. In this context, the study runs nonlinear quantile-on-quantile (QQ) regression and Granger causality in quantiles (GQ) as the main models with daily data from January 2, 2019, to March 10, 2023, while quantile regression (QR) is used for robustness check. The findings present that in terms of CO2 emissions: (i) EG from coal, natural gas, and oil has a stimulating effect at higher quantiles in all countries; (ii) EG from hydro has an increasing effect at higher quantiles, while it has a decreasing effect at lower and middle quantiles in all countries except France; (iii) EG from solar has a dampening effect at higher quantiles in all countries except France; (iv) EG from wind has a declining effect at higher quantiles in both Spain and France; (v) both fossil and renewable energy EG have a causal effect on residential sector CO2 emissions at the disaggregated level except at some quantiles. Overall, the effect size and the causal effect of EG on CO2 emissions change for quantiles, countries, and EG sources. Therefore, the study proposes to rely on the specific EG sources for Germany and Italy (solar energy), Spain, and France (wind energy) to mitigate climate change by reducing residential CO2 emissions.

Exposure and preparedness for wartime inflation in the EU: Retrospective cluster analysis

AbstractThe impact of the Russian-Ukrainian war on energy prices contributed significantly to European price increases in 2022. The study aims to find a linkage between the performance of 24 EU countries during the energy inflation crisis and their preparedness, vulnerability or exposure. The verified hypotheses reflect on the role of initial conditions of countries and the one-year impact of energy inflation on their economic performance. The two-step analysis first creates six clusters of countries based on their energy, trade, financial and political vulnerability, and preparedness indicators. The second step is to explore the shifts of clusters in expectations on macroeconomic indicators. Specific patterns of country groups are explored in the value and evolution of wartime indicators of inflation, GDP growth, consumer and business confidence, as well as FX volatility. The exploration concludes that the entry variables of clustering are relevant, and the EU countries can be segmented by dependency, energy, financial, and political aspects. Thus, it is possible to verify the distance in risk and exposure among EU economies. The impact variables demonstrated that the extent of the inflationary effect depended on the initial conditions. In addition, the research identified protective short-term factors against energy inflation originating in a trade and war context.

Environmental Goods and Services: Developments of the Concept, the Economic Sector, and the Markets

Abstract Green (environmental) marketing, which promotes cleaner, less detrimental products, is considered to be one of the main contributors to sustainable production and consumption. With the latest EU policy initiatives aimed at acceleration of green transition, it deserves even more attention while the concept of environmental goods and services still remains a subject for discussion, and both comparative environmental impact of some of such products and the green demand probably are overestimated. The studies offer an approach to the theoretical concept of environmental goods and services providing the integrated vision through the prism of the ecological economics, national accounting, and marketing with the initial point of green (environmental) needs. To understand full potential of marketing for environmental sustainability, which is of growing importance, the studies address the sole purpose environmental products also as those which are beyond the green marketing efforts, but playing the equally important role. Production of environmental goods and services by the EU economy is analysed with special attention to groups of products by their primary purpose, and conclusions are drawn regarding the sustainability potential of different fields of marketing.

How EU Labor Mobility Shapes Economies: Impacts on Sending and Receiving Nations

This study explores how workers moving within the European Union affect the economies of both the countries they leave and those where they settle. We look at how migration changes economic growth, businesses, and job markets. Migration can be driven by people seeking better economic opportunities or by humanitarian needs, like asylum seekers. It's a key part of how the EU's economy works, with big consequences. We analyze data from key EU countries to build models that show these impacts. Our results show that immigration changes job markets in receiving countries and boosts innovation. Emigration benefits sending countries, mainly through money sent home by workers abroad, despite some drawbacks. This study helps us better understand the complex economic effects of migration within the EU.