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Population–employment dynamics in the European Union: Does innovation lead or follow?

Author

Listed:
  • Luisa Alamá-Sabater

    (Department of Economics and IIDL, Universitat Jaume I, Castellón, Spain)

  • Joan Crespo

    (INTECO and Department of Economic Structure, Universidad de Valencia, Spain)

  • Miguel Ángel Márquez

    (Department of Economics, Universidad de Extremadura, Spain)

  • Emili Tortosa-Ausina

    (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain)

Abstract

This article examines the interaction between innovation and employment and population dynamics through the development of a system of simultaneous equations. The model is applied to a panel dataset of 271 European NUTS-2 regions. The results reveal strong bidirectional feedbacks between innovation and employment, while population dynamics operate indirectly through employment rather than exerting a direct effect on innovation. Innovation is found to follow jobs rather than people, indicating that the concentration of economic activity and labor interactions, not demographic size per se, constitute the primary drivers of regional innovative capacity. These mutually reinforcing dynamics give rise to virtuous and vicious cycles that contribute to persistent regional disparities. By opening the black box of employment–population–innovation interactions, the paper provides a structural foundation for designing more effective population, innovation, and employment policies. In particular, the analysis demonstrates that policies targeting a single dimension, whether business climate, quality of life, or innovation support, are unlikely to succeed in isolation.

Suggested Citation

  • Luisa Alamá-Sabater & Joan Crespo & Miguel Ángel Márquez & Emili Tortosa-Ausina, 2026. "Population–employment dynamics in the European Union: Does innovation lead or follow?," Working Papers 2026/08, Economics Department, Universitat Jaume I, Castellón (Spain).
    • Handle: RePEc:jau:wpaper:2026/08
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    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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