Benign effects of technological change on the labour share: evidence from European regions

Abstract The labour share across European regions has shown significant variation since the late 1990s. This paper explores the role of technological change in explaining this regional variation. Specifically, this paper proposes and tests the hypothesis that the recent shift in technological change is labour-intensive, driven by a localised, bottom-up process that exploits the skills and learning processes of the workforce. The empirical analysis, using data from 171 European regions over the period 1999–2015, supports the theoretical framework, showing that technological change has a positive and economically significant impact on the labour share.