Specification issues in models of population and employment growth

This article examines two specification issues common to spatial econometric population-employment growth models: the specification of the weight matrix and the dynamic stability implied by estimated lag parameters. Using data on Orange County census tracts from 1980 to 1990, we estimate a simultaneous system of regressions for tract population and employment growth. Six different weight matrices are tested, ranging from simple contiguity matrices to more complex matrices based on commute flows between census tracts. We also examine whether the inclusion of detailed information on land use improves performance of the lagged adjustment model. The results provide insights for future applications of econometric population-employment growth models. We found that the estimated lag parameters were consistent with dynamic stability for the models that included detailed land use data. Results varied for different weight matrices, but variation was mostly confined to interaction between population and employment growth.