AI in Europe – Is Regulation the Answer to Being a Laggard?

AI is characterized by the features of a general purpose technology and thus has the potential to spur innovation and productivity across sectors. While large digital U.S. companies are dominant players in the development of AI models, Europe is lagging behind. The European Union has agreed on the AI Act in order to allow for innovation, in particular for SMEs, and to prevent harm to society. However, regulation may have ambiguous effects on the state of the digital economy in Europe and of AI in particular. We point out these potential effects and suggest measures to speed up AI development and usage in Europe. We thereby build on recommendations of the Commission of Experts for Research and Innovation (EFI) as well as the Scientific Advisory Board of the German Ministry of Economic Affairs and Climate Action.

Bertschek, Irene and Achim Wambach (2024), AI in Europe – Is Regulation the Answer to Being a Laggard?, The Economists’ Voice