Interaction of Regional Population and Employment over Time:

comments on earlier drafts. The assistance of Jelte Haagsma in preparing the dataset is also gratefully acknowledged. 2 Interaction of Regional Population and Employment over Time: identifying short-run effects and equilibrium adjustment We investigate the interaction of regional population and employment in a simultaneous model. A focus on regional time series allows us to innovate in two ways on the ongoing causality debate in the literature. Firstly, a dynamic specification is proposed that generalizes the often assumed lagged adjustment process and enables to identify both short and long-term effects. We argue that the long-run relationship between population and employment should be interpreted as a labour market equilibrium. A second improvement on current empirical evidence is the use of region and time-specific fixed effects. Because by applying these panel data techniques, unobserved heterogeneity on the regional level and national trends are controlled for, th