This paper investigates the determinants of technological catch-up and examines at a refined level of spatial and sectoral aggregation to what extent geographical and/or technological proximity to the technology leader impact regional employment growth. Technological progress is endogenously determined and depends on specialization, competition and diversity. We also allow technological progress to depend on agglomeration economies in proximate regions, and model technological progress by means of a hierarchical process of catch-up to the technology leader. Results indicate that human capital plays a crucial role in promoting sectoral employment growth. The effect of technological distance varies, depending on which sector is considered. Technological distance to the leader shows a positive and significant effect on employment growth in the sectors Construction & Manufacturing, Information & Utilities, and Services. No effect of technological distance was found for Finance & Management, Transportation & Trade, and Natural Resources. The effect of geographical distance to the technology leader on employment growth also varies across sectors. A negative effect is observed for Construction & Manufacturing and Finance & Management, while the effect is positive for Natural Resources and Transportation & Trade, and statistically not different from zero for Information and Utilities and Services.