Digital Transformation and Its Influence on Socio‐Economic Dynamics in the Context of the European Union

Digitalization is reshaping labour markets across the European Union, but its employment implications vary considerably among regions with different economic, technological, innovative and socio‐economic characteristics. This study examines the relationship between digitalization and employment using a balanced panel of 242 EU NUTS2 regions observed between 2011 and 2023, comprising 3146 region‐year observations. The analysis considers regular internet use, employment in high‐technology sectors, R&D expenditure, regional GDP and the at‐risk‐of‐poverty rate. The empirical strategy combines a two‐way fixed‐effects model with NUTS2‐clustered standard errors, a fixed‐effects specification with Driscoll–Kraay standard errors and a two‐step System GMM estimator. The results show that regular internet use is consistently associated with regional employment across all specifications, although its economic magnitude is limited. Regional employment exhibits substantial temporal persistence, whereas the estimated contributions of socio‐economic vulnerability, high‐technology specialization and R&D expenditure vary between the static and dynamic models. These findings indicate that digital adoption alone is insufficient to generate uniform labour‐market improvements, and that regional structural conditions shape the capacity to benefit from technological change. The study contributes to the literature by replacing national averages with harmonized NUTS2 evidence and by distinguishing contemporaneous regional associations from dynamic labour‐market adjustment. From a policy perspective, the results support a differentiated approach that combines selective concentration of frontier technological investment with structured diffusion, workforce development and place‐based capability‐building in less‐developed regions.