Federal spending and economic growth in Appalachian counties

In this paper I use a model informed by key theories of regional processes, and I test three related hypotheses concerning the effects of different ty pes of federal spending (public investment, defense, salaries/wages) on eco nomic growth in the 399 Appalachian counties during recent business cycles. The analysis incorporates a maximum likelihood estimate spatial lag regres sion model and shows that federal public investment spending and defense sp ending exerted net: positive effects on per capita income, civilian employm ent, and private nonfarm employment growth rates between 1983 and 1988. In addition, public investment spending had a positive relationship with perce ntage of earnings from mining for the 1983-1988 period. Federal spending, h owever, had less consistent effects during the 1989-1992 recession. Implica tions for theory and research on regional processes are discussed.