The EU investment gap is really an R&D gap

Daniel Gros (), Philipp-Leo Mengel () and Giorgio Presidente
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Daniel Gros: Bocconi University
Philipp-Leo Mengel: Bocconi University

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2025, vol. 52, issue 3, No 6, 667-682

Abstract: Abstract This paper examines the prevalent notion of an “investment gap” in Europe. By using data from different sources, we come to three conclusion. First, as a share of GDP, overall investment is higher in Europe than in the US. Second, where Europe significantly lags is in intangible investments, especially in R&D and software. Third, this is due mainly to a composition effect, since European industry is concentrated in mid-tech sectors with low research intensity. We conclude that the current public financing initiatives at the national and EU level that focus mainly on tangible low-risk and thus low-return projects do not foster high-tech industries and innovation, and thus ultimately do little to increase long-term growth in Europe.

Keywords: Investment gap; Middle-technology trap; European Union; Industrial composition; Tangible investment; Intangible investment; L5; O3 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40812-025-00365-0

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