A SPATIAL MODEL OF REGIONAL VARIATIONS IN EMPLOYMENT GROWTH IN APPALACHIA

In this study, a spatial equilibrium model of employment growth is developed and empirically estimated by Generalized Spatial Two-Stage Least Squares (GS2SLS) estimator using cross-sectional data from Appalachian counties for 1990-2000. Besides the existence of spatial spillover effects, the results suggest that agglomerative effects that arise from the demand and the supply side contribute to employment growth in the study area during the study period. The policy implications of the findings are: (1) Regional cooperation of counties and communities is advisable and may in fact be necessary to design effective policies to encourage employment growth; and (2) Policy makers at the county level may need to design policies that can attract people with high endowments of human capital and higher income into their respective counties.