New DyNamics for europe: reapiNg the beNefits of socio-ecological traNsitioN
Harald Badinger, David Bailey, Lisa De Propris, Peter Huber, Jrgen Janger, Kurt Kratena, Hans Pitlik, Thomas Sauer, Renaud Thillaye, Jeroen van den Bergh
Hig
H-ro
ad st
rategy
part ii: moDel aND area chaptersfiNal VersioNMarch 2016
wellbeiNg
sustaiNability
iNclusiVeNessDyNamics
eNViroNmeNtal sustaiNa bility
iNNo VatioN
goVerN-aNce
welfare state
regioNs
moDelliNg iNter-
DepeNDeNcies
coNtact for iNformatioNProject Coordinator: Karl AigingerScientific Coordinator: Margit SchratzenstallerWIFO Austrian Institute of Economic ResearchArsenal, Objekt 20, 1030 [email protected]
This report can be downloaded from www.foreurope.euModel and Area Chapters (http://Synthesis-Report-Part-II.foreurope.eu)Synthesis (http://Synthesis-Report-Part-I.foreurope.eu )Synthesis - Executive Summary (http://Synthesis-Summary.foreurope.eu)
Please cite as follows: Badinger, H., Bailey, D., De Propris, L., Huber, P., Janger, J., Kratena, K., Pitlik, H., Sauer, Th., Thillaye, R., van den Bergh, J., New Dynamics for Europe: Reaping the Benefits of Socio-ecological Transition. Part II: Model and Area Chapters, WWWforEurope Synthesis Report, Final Version, Vienna, Brussels, 2016.
theme ssh.2011.1.2-1
Socio-economic Sciences and Humanities Europe moving towards a new path of economic growth and social development - Collaborative project
This project has received funding from the European Unions Seventh Framework Programme for research, technological development and demonstration under grant agreement no. 290647.
authors
Model chapter: Kurt Kratena (WIFO)
Chapter Area 1: Hans Pitlik (WIFO)
Chapter Area 2: Jeroen van den Bergh (UAB)
Chapter Area 3: David Bailey (Aston), Lisa De Propris (UOB), Jrgen Janger (WIFO)
Chapter Area 4: Harald Badinger (WU), Renaud Thillaye (policy network)
Chapter Area 5: Thomas Sauer, Peter Huber (WIFO)
reViewers
Kurt Bayer, Margit Schratzenstaller, Gunther Tichy (WIFO)
Model Chapter: Karl Aiginger (WIFO)
Chapter Area 1: Torben M. Andersen (Aarhus University), Nigel Driffield (Aston Business School), Alois Guger (WIFO)
Chapter Area 2: Miklos Antal (Central European University)
Chapter Area 3: Dominique Foray (EPFL), Arvanitis Spyridon (ETH Zrich), Marco Vivarelli (Universit Cattolica del Sacro Cuore), Helga Nowotny (ERA Council Forum Austria)
Chapter Area 4: Fritz Breuss, Markus Leibrecht (WIFO)
Chapter Area 5: Martin Hallet (European Commission), Geoffrey Hewings (University of Illinois), Mario Polse (INRS Montreal), Roman Stllinger (WIIW)
mailto:wwwforeurope-office%40wifo.ac.at?subject=http://Synthesis-Report-Part-II.foreurope.euhttp://Synthesis-Report-Part-I.foreurope.euhttp://Synthesis-Summary.foreurope.eu
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CONTENTS
1. Macroeconomic Models for a socio-ecologial transition strategy 2 1.1 Modelling approaches for policy strategies 2
1.2 Key specifications in macro-economic modelling 5
1.3 Model simulation exercises 9
1.4 Conclusions 24
1.5 References 25
2. Chapter Area 1: Challenges for the European welfare states 28 2.1 Introduction 28
2.2 Area 1 results in a nutshell 30
2.3 Synergies, tradeoffs and reform implementation challenges 43
2.4 Some final remarks 49
2.5 References 50
3. Chapter Area 2: Analysing policies for a transition to a low-carbon economy 55
3.1 Introduction 55
3.2 Core notions and issues to be addressed 58
3.3 Empirical background studies 60
3.4 Four complementary policy models 64
3.5 Further policy insights 73
3.6 Conclusions 79
3.7 References 81
4. Chapter Area 3: Drivers of change innovation and industrial policies 85
4.1 Introduction: Europe's challenges on innovation and industrial performance 85
4.2 Main findings of Area 3 in the perspective of developing a new growth and development strategy 87
4.3 Conclusions: From Tradeoffs to Synergies? 105
4.4 References 110
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5. Chapter Area 4: Governance structures and institutions at the European level 113
5.1 Introduction 113
5.2 The EMU crisis and its legacy 114
5.3 Reforming EU economic governance: options and parameters 121
5.4 The road ahead, conclusions 132
5.5 References 133
6. Chapter Area 5: The role of regions in the European socio-ecological transition 137
6.1 Introduction 137
6.2 Background to the different case studies 139
6.3 Empirical findings 143
6.4 Summary and Policy Conclusions 151
6.5 References 155
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TABLES AND FIGURES Table 1 Macroeconomic effects of "Green Tax Reform 22
Table 2 Effects of "Environmental Fiscal Devaluation" on households 23
Table 3 Macroeconomic effects of "Environmental Fiscal Devaluation" 23
Table 4 Summary of results 72
Table 5 Policy challenges illustrated for a transition to sustainable energy 75
Table 6 Scores and output weights obtained with Model 4, for selected European economies 79
Table 7 Findings and recommended options 154
Figure 1 Income, consumption, and carbon footprint shares of household income groups in the EU27 DYNK model 18
Figure 2 Real output impact of policy experiments in ECOGRO 18
Figure 3 Unemployment rate impact of policy experiments in ECOGRO 19
Figure 4 Energy demand impact of policy experiments in ECOGRO 19
Figure 5 GHG emission impact of policy experiments in ECOGRO 20
Figure 6 Real GDP impact of policy scenarios 20
Figure 7 Unemployment impact of policy scenarios 21
Figure 8 Carbon stock impact of policy scenarios 21
Figure 9 Impact of "Green Tax Reform" on GDP, emissions and energy use 22
Figure 10 Impact of "Environmental Fiscal Devaluation" on GDP, emissions and energy use 24
Figure 11 Total welfare state generosity index, by welfare regime group (period 1980-2010) 29
Figure 12 Welfare state expenditures: Government spending on social protection, health, education and Active Labour Market Policies (in percent of GDP), 2012 45
Figure 13 The SFC model framework 71
Figure 14 New perspectives outcomes: Income pillar 99
Figure 15 New perspectives outcomes: Social pillar 100
Figure 16 New perspectives outcomes: Ecological pillar 101
Figure 17 Towards a concept of competitiveness under new perspectives 103
Figure 18 New Industrial Policy 106
Figure 19 The "EMU-crisis" consisting of multiple crises in the Euro area 115
Figure 20 New Economic Governance of EMU since 2010 116
Figure 21 The structure of Europe 2020 objectives 121
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NEW DYNAMICS FOR EUROPE: REAPING THE BENEFITS OF SOCIO-ECOLOGIAL TRANSITION Harald Badinger, David Bailey, Lisa De Propris, Peter Huber, Jrgen Janger, Kurt Kratena, Hans Pitlik, Thomas Sauer, Renaud Thillaye, Jeroen van den Bergh
PREFACE The WWWforEurope Synthesis Report contains two parts. Part I1
Part II of the WWWforEurope Synthesis Report comprises two distinctive parts and serves a dual purpose.
is an overarching synthesis, Part II reports on the results of different models and presents research findings in the five areas which were inputs for the synthesis.
The first section describes the results of modelling the effects of starting the socio-ecological transition towards a sustainable development path. The models pull together results from the research performed by the various contributors to this project and arrive at the highly remarkable result that (under certain conditions and assumptions) the triple objectives of wellbeing, economic dynamics, social inclusiveness and environmental sustainability can be achieved. Given the tradeoffs and synergies discussed in Part I of this Synthesis Report, the model results show one possible way to achieve the desired transition.
The second section pulls together all the research completed within this project and contains the so-called Area Chapters. These reports were written by the leaders of the five research areas in conjunction with and as summaries of more than 160 research papers organised into the following areas: (1) Challenges for the European welfare state, (2) Analysing policies for a transition to a low-carbon economy, (3) Drivers of change innovation and industrial policies, (4) Governance structures and institutions at the European level and (5) The role of regions in the European socio-ecological transition. They mirror the work packages according to the WWWforEurope research proposal and form the consolidated backbone of the first part of the synthesis report. Moreover, they contain various connections to the first section of this volume, i.e. the Model Chapter (this is especially true of Area Chapter 2), to which they contribute assumptions and content.
The Area Chapters are attached to this report for the purpose of both substance and documentation. While the final versions have been refereed by the project coordinator (WIFO), they ultimately remain the responsibility of their authors. As a consequence, the structure of the Area Chapters varies.
1 Aiginger, K., New Dynamics for Europe: Reaping the Benefits of Socio-ecological Transition. Part I: Synthesis, WWWforEurope
Synthesis Report, Final Version, Vienna, Brussels, 2016 (download from http://Synthesis-Report-Part-I.foreurope.eu).
http://synthesis-report-part-i.foreurope.eu/
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1. MACROECONOMIC MODELS FOR A SOCIO-ECOLOGIAL TRA
