Digitalization and regionalization of Global Value Chains in European industries

Abstract This paper explores the relationship between digitalization and the regionalization of Global Value Chains (GVCs) in European industries. The paper discusses the theoretical channels through which digital technologies may influence GVC regionalization and develops a conceptual framework to guide the empirical analysis. The analysis focuses on the manufacturing sectors of a sample of European countries in the period 2005–2018. To econometrically identify the causal effect of digital technologies on regionalization, we implement a Bartik instrumental variables approach exploiting patent data on information and communication technologies (ICT) and artificial intelligence (AI). Our main finding is that digital technologies enhance the intra-EU flows more than the extra-EU ones, thus pointing to the regionalization of GVCs in Europe.