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  • A previous version of this paper was presented at the conference “Urban Development: Patterns, Causes, Foundations and Policy” organized by the Institute for Housing and Urban Development Studies (IHS), the Erasmus University Rotterdam, and Utrecht University (Department of Economics and Faculty of Geosciences), in Rotterdam, The Netherlands, 13–14 December 2010. The authors would like to thank the conference participants, the journal reviewers, and the editors for useful comments and discussion.


ABSTRACT An important subset of the literature on agglomeration externalities hypothesizes that intrasectoral and intersectoral relations are endogenously determined in models of local and regional economic growth. Remarkably, structural adjustment models describing the spatio-temporal dynamics of population and employment levels or growth traditionally do not include intersectoral economic dynamics. This paper argues and shows that allowing for economic linkages across sectors in these models adds considerable value, especially in forecasting. An econometric model of population–employment dynamics, in which sectoral variations in economic development are explicitly taken into account, is applied to a large urban planning policy proposal in the Netherlands. The empirical analyses suggest that population dynamics are largely exogenous, population changes drive employment in particular in the industry and retail sectors, and employment in all sectors depends strongly on intersectoral dynamics. Intersectoral dynamics appear as important drivers of regional sectoral employment changes; they are even more important than population changes, and their effect shows up clearly even within the Dutch institutional context where strict regulatory housing and planning restrictions are enforced.