What drives EU economic growth? Key takeaways in a shifting global economy

Purpose This study explores the key drivers of economic growth in the EU from 2000 to 2024, focusing on investment, trade openness, government expenditure and R&D. Using panel data from 27 EU countries, the research examines how these variables influence GDP per capita growth, emphasizing the role of human capital, foreign direct investment (FDI) and manufacturing. Design/methodology/approach The study employs the generalized method of moments (GMM) to address endogeneity and obtain robust estimates. The model includes lagged GDP per capita growth, investment, trade openness and government expenditure, along with R&D-related variables such as researchers per million inhabitants and tertiary school enrollment. The analysis also explores variations based on R&D intensity and transition status. Findings Results indicate that trade openness significantly boosts economic growth, with manufacturing growth playing a key role, particularly in higher R&D-intensity countries. Government expenditure and investment appear insignificant, while tertiary enrollment can have negative effects, depending on the context. Originality/value This study provides novel insights into the heterogeneous effects of R&D and human capital on EU economic growth, emphasizing the importance of trade and industrial policies in fostering long-term development.