European regional employment and exposure to labour-saving technical change: Results from a direct text similarity measure

Does labour-saving technological change pose a threat to European employment, and if so, to what extent? This study investigates the degree of employment exposure to labour-saving technological change across NUTS-2 regions in Europe. We construct a cross-walked metric between the SOC and ISCO classification systems to adapt the direct measure of occupational exposure developed by Montobbio et al. (2024) for the US economy and apply it to the European context. This methodology enables us to generate detailed insights into the exposure of European occupations by leveraging the similarity rankings between technological classifications in the USPTO (CPCs) and task descriptions. To evaluate the transmission from occupational exposure to employment outcomes, we utilise data from the European Structure of Earnings Survey (EU-SES), thereby constructing exposure indices at both sectoral and regional levels. Finally, we examine the industrial and geographical diffusion of labour-saving technological change in recent years and provide robust econometric evidence indicating that low-wage regions, as well as deindustrialising areas heavily integrated into global value chains, are disproportionately vulnerable to the threat of substitution.