Understanding regional high-order service growth in Canada: a cointegration approach

Does employment in regional ‘high-order’ service industries cause d~used regional economic growth (as held by subsidy proponents), or vice versa (as held by detractors), or do feedback systems exist where causality runs in both directions simultaneously? We use time series data for GDP and employment for two principal NAICS service industry classifications to test for evidence of long-run equilibria and causality relationships between these variables for Canada and five provinces. The preliminary results suggest some surprising regional variations that are relevant whether or not one believes that firm-specific subsidies hold the elusive key to prosperity in peripheral regions.