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Digital innovation and transformation drive what has been called the Fourth Industrial Revolution or Industry 4.0. This digital transformation of all industry sectors will revolutionise the structure and governance of markets and lead to a significant reconfiguration of work and employment.

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On the one hand, integrating digital innovations in business strategies is an essential means of creating value. Further, the digital transformation allows deep connection of systems creating seamless digitalised value chains with increased efficiency. On the other hand, there may be pressure on social cohesion, since only certain social groups and/or regions and/or countries will benefit while others are left behind. Also, the distribution of the newly created value may be uneven, for example via the potential erosion of the tax base due to fewer taxable jobs, or due to the fact that digital platforms and transactions risk to be elusive to taxation. Thus, the digital transformation of the industry puts serious challenges to the European economies and social welfare models. In order to support an informed debate on how to address these challenges, scenarios have been developed reflecting different labour and taxation policy options, and analysing the impact on economic growth, jobs and social cohesion of Europe’s economies and societies.

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