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

Luisa Alamá-Sabater (), Joan Crespo (), Miguel Ángel Márquez () and Emili Tortosa-Ausina ()
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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

No 2026/08, Working Papers from Economics Department, 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.

Keywords: innovation; population-employment dynamics; European Union; NUTS2; spatial effects; territorial development (search for similar items in EconPapers)
JEL-codes: C3 O18 O21 R1 R23 R3 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2026
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