Prof Emanuele Bracco

Europe has fallen behind the United States in productivity and income growth, but lower GDP does not necessarily imply lower living standards. The real challenge is whether Europe can sustain its social model while remaining competitive through greater innovation and productivity.

AI innovation is shifting income from labour to capital in Europe. Regions with higher AI patent activity show declines in labour’s share, mainly through wage compression for medium- and high-skilled workers. This trend raises risks of greater inequality and highlights the need for policies that spread AI’s benefits more broadly.

U.S. dollar dominance persists despite geopolitical tensions and trade fragmentation because it functions as a coordination equilibrium. Network effects and strategic complementarities make switching currencies costly for users, reinforcing durability once dominance is established. This explains the dollar’s continued central role in global transactions, even without U.S. involvement, and the limited impact of protectionism, trade wars, or rising financial competition on its global position.