Rethinking technological complexity and investment: a sectoral analysis in the EU 1995–2020

Abstract The recent commercial “war” between developed economies calls for analysis of the factors that drive investment, exports, and technological capabilities. This study tries to explain the widening of technological and productive disparities in the European Union, analyzing sectoral investments, and revealing that the sectoral composition of peripheral economies has not shifted towards more technologically complex activities, highlighting the urgent need for the formulation of a new industrial policy. We develop a technological complexity index for each sector, to explore the relationship between technological complexity, investment, consumption, interest rates, and foreign direct investments, using relevant econometric techniques. Among the key findings is the explanation of the disintegration of industrial sectors in the weaker economies.