EconPol Europe: Evidence-Based Policy Debate

The use of artificial intelligence (AI) is changing the labor market, above all for young job seekers. This is suggested by a new early indicator from the ifo Institute that tracks the effects of AI on the labor market. Employment of young people starting their careers is falling in occupations with high exposure to AI, while overall employment remains stable. “We see no sign so far of broad job losses due to AI. But those starting out in working life are the first to feel the change,” says ifo President Clemens Fuest.

Demographic shifts toward an aging population are shrinking the number of working-age people in European economies. This erodes the very foundation of future growth and well-being. How can this trend be countered? A new EconPol Report provides an overview of the measures needed to mobilize the untapped labor supply. It focuses on three key levers: increasing women’s labor force participation, extending the working lives of older adults, and improving the integration of migrants into the labor market.

Administrative capacity is just as relevant as policy design, as administrative quality mediates policy impact. This is particularly true of municipalities, which account for a vast portion of public investment aimed at achieving the EU’s strategic objectives. The new Forum issue focuses on implementation rather than policymaking. It examines ways to facilitate access to grants and improve the awarding of tenders, and it looks at how administrative capacity can be expanded through managerial practices, targeted monitoring, and know-how transfer.

Additional EU tariffs on Chinese imports can only eliminate critical dependencies and unfair competitive pressure from China up to a point. “Depending on how they are structured, tariffs entail considerable economic costs and often also have unintended consequences. How suitable they are depends greatly on the objective they are meant to serve,” notes Lisandra Flach, Director of the ifo Center for International Economics.

German manufacturing firms would invest more in climate-friendly technologies if the carbon price were higher and, at the same time, more reliable. “For many companies, predictable carbon prices determine whether, for example, a new, climate-friendly facility is worthwhile,” notes ifo researcher Mathias Dolls. “On average, the companies surveyed only invest when the price remains consistently above EUR 90 per metric ton of CO₂. When price fluctuations are too severe, companies do not invest.”

Economic experts rate current economic uncertainty as high as 60.7 on a 0–100 scale, with geopolitical tensions and uncertainty surrounding energy and commodity supplies identified as leading drivers, according to a new EconPol Policy Brief. Structural vulnerabilities, particularly weak institutional and governmental frameworks as well as heavy dependence on commodity imports, further amplify uncertainty - which lowers expected GDP growth by an average of 0.8 percentage points.

EconPol Forum (formerly CESifo Forum) is a quarterly English-language journal to bring economic analysis on topics of worldwide interest along with policy advice to a broad range of policymakers and the public.

EconPol Policy Briefs are short articles providing key findings of policy-related studies and policy implications from recent policy relevant economic research. Grounded in evidence-based insights, the Policy Briefs discuss current topics in economic and fiscal policy within a wide range of specific areas of expertise. 

EconPol Policy Reports conduct comprehensive economic analysis on current European economic and fiscal policy issues, fostering a deeper understanding of European economic development and the implications of policy measures. The reports provide valuable insights into policy scenarios and the impact of economic policies, facilitating informed public discussions and evidence-based policy making.