Report from Europe shows just how much.
This article shares the results of a study completed by Nima Sanandaji, Director of the European Centre for Entrepreneurship and Policy Reform, and Klas Tikkanen, Chief Operating Officer at Nordic Capital.
Since 2017, the geography of knowledge-intensive employment in Europe has been closely studied by examining the share of adults in 34 European countries and 244 regions who are employed in highly knowledge-intensive technology jobs—in other terms, roles that rely heavily on expertise, technology, and research as well as advanced information processing and cognitive skills.
The results are very clear: countries in Europe with lower taxes have a higher concentration of knowledge-intensive jobs and are also where new knowledge-intensive jobs are growing.
The geographical mapping of Europe’s highly knowledge-intensive “brain business” jobs has gained increasing attention from national and regional governments, educators, researchers, chambers of commerce, and businesses across Europe. For example, the governments of Ireland and Estonia have leveraged the brain business jobs index for their innovation policy planning. It has been used likewise by Nordic governments. The index has global impact, having been used as university course literature in countries such as India and Mexico to understand the shifting economy of Europe.
There are two factors that help determine which European countries have the highest share of adults in knowledge-intensive jobs: the number of adults who work as engineers and scientists, since the two are closely related to the share who work in knowledge-intensive jobs; and a country’s tax rates. These two factors show that countries with higher taxes have fewer workers in knowledge-intensive roles compared with countries that have lower taxes.
The best example of this is that, while Sweden has the highest share of adults who are engineers and scientists, the share of adults who are employed in brain business jobs specifically is ranked third highest among European countries, since not all engineers and scientists are employed in knowledge-intensive roles. Switzerland has, in all versions of the brain business jobs index, been ranked first, and Ireland has, during recent years, outpaced Sweden to second.
Europe is an increasingly integrated marketplace, and the growth in accordance with economic theory occurs where opportunities are best. This means that as business regulation becomes increasingly streamlined in the EU and its neighboring countries, growth is shifting toward places where taxes are lower, environments are more business-friendly, and talent is available at competitive prices.
The most significant increase in the share of adults employed in brain business jobs occurred in Cyprus, where the share has increased by 159% between 2014 and 2026. In Portugal and Croatia, the share has more than doubled, and in Lithuania, Poland, Bulgaria, Romania, Malta, and Estonia, the share has increased by more than 75%.
The UK fares relatively well, but overall, the large countries in Europe stagnate, having few adults in brain business jobs. Instead, smaller countries with lower taxes are climbing to the top. As mentioned, Malta, the Netherlands, Estonia, and Cyprus are examples of nations with a strong number of brain business jobs. These countries have seen such growth in knowledge-intensive jobs that brain business jobs now make up 10% of all jobs.
The capital regions of four Central European countries and of Portugal are where many digital nomads flock. Here, one can find jobs, a relatively free market for housing and work, competitive taxes, and an abundance of knowledge-intensive jobs.
In total, there are roughly 1.1 million brain business jobs in the French capital region, Paris. This is far more than any other part of Europe, since Paris has such a big population, but the share of adults employed in brain business jobs there is 14.6%, 19th highest in Europe. London ranks 16th, with a 14.8% share of adults in brain business jobs, and Stockholm holds a 17.9% share, which over time has slipped from 2nd to 9th place. At the top are Bratislava (24.8%), Prague and Budapest (22.2%), Lisbon (20.5%), and Bucharest (19.9%).
The story of Europe is all about institutional competition, and it’s a story that repeats itself throughout history again and again. The large economies of Europe are stagnating with growth in general, and as examined, growth of knowledge-intensive brain business jobs in particular.
One can assume that this means Europe is stagnating. However, massive progress is happening in smaller European nations, which typically combine lower tax rates with more economic progress and growing human capital in their metropolitan regions.
Growth in an increasingly integrated European market shifts to where the tax burden is lower, human capital is more available, and wages are more competitive. Thus, institutional competition is created among regions and countries to create the best conditions, resulting in pressure to reform, even for the larger European nations.
The shifting knowledge-intensive geography of Europe illustrates the importance of creating a favorable tax and regulatory climate. Regions where a higher share of adults work in brain business jobs have, on average, lower unemployment rates, since these jobs not only are important in themselves given our increasingly technological world, but they also stimulate creation of other jobs in local services as well as companies that are suppliers to these brain businesses.
According to economic theory, large countries have economies of scale advantages. The lesson from Europe is that when smaller countries instead turn to competitive tax and business policies, this can compensate for the effect and even allow smaller countries to overtake larger ones, especially if large countries focus on high taxes and stiff government control.
