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The Uneven Development Paradox of the High-Tech Sector Amid a Comparable Economic Growth in the European Union and the United States

Studies on Russian Economic Development volume 32, pages 555–563 (2021)Cite this article

Abstract

In recent decades, the European Union has placed great emphasis on the development of the high-tech sector by increasing R&D spending and subsidizing science-based small and medium-sized enterprises (SMEs). This policy has intended to close the gap in the development of high-tech industries between the European Union and the United States, thereby strengthening the European economy. However, despite the relatively low development of the European high-tech sector, the GDP indicators of the United States and the European Union demonstrate convergence over time. In this paper, this paradox is explained by differences in the industry specialization and integration between the European Union and the United States. These differences are observed when analyzing the input–output tables with the data on sales flows between different types of industries and consumers. The results show an underestimation of the integration of traditional industries in Europe. This means that the economic growth is stimulated not only by the (high-tech) industry specialization but also by the integration of (traditional) industries.

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Fig. 3.
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Notes

  1. In this study, the European Union is considered as the EU15, because the baseline year in the analysis is 1995 (the first year for which data are available), when the European Union consisted of fifteen countries.

  2. Since Hall and Soskice consider the majority of the EU15 countries as coordinated market economies [22], the EU15 as a whole is also considered as a coordinated market economy in this study.

  3. This study used the fourth revised version of the International Standard Industrial Classification of All Economic Activities (ISIC), and all the industries were classified by Pavitt’s types. For example, supplier dominated industries (SD) include agriculture and construction; specialized suppliers (SS) include manufacturers of electrical equipment and computers and office equipment; science-based industries (SB) include chemical industry, pharmaceutical industry, and R&D; scale intensive industries (SI) include metallurgy, telecommunications, and equipment. The government segment (GOV) includes healthcare and education.

  4. Professional services were excluded from the analysis because the “products” of this industry (i.e., services) are based on information rather than R&D.

  5. Since the industry specialization and integration of the European Union and United States are measured as a percentage of their total sales for each year in the study (1995, 2000, and 2005), there are enough data in US dollars in current prices, without needing to convert them into US dollars, PPP, current prices, in order to correct for the difference in inflation between the EU15 and the United States, which develops over time.

  6. For the United States: the total volume of US exports. For the EU15: exports to all countries, except for the EU15.

  7. The pie chart shows the percentage of the total sales, which is associated with the selected industry types and the government. The sales of households are negligibly small and are therefore not shown in the pie charts.

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Authors and Affiliations

  1. Primakov Institute of World Economy and International Relations, Russian Academy of Sciences, Moscow, Russia

    Z. A. Mamed’yarov

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Translated by A. Kobkova

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Mamed’yarov, Z.A. The Uneven Development Paradox of the High-Tech Sector Amid a Comparable Economic Growth in the European Union and the United States. Stud. Russ. Econ. Dev. 32, 555–563 (2021). https://doi.org/10.1134/S1075700721050075

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Keywords:

  • high-tech industries
  • innovative development
  • input–output
  • industry specialization
  • innovation