Amenities and Rural Appalachia Economic Growth

Abstract

Patterns of economic growth in rural Appalachia are examined with a focus on natural and built amenities. While the literature is clear that rural areas endowed with scenic beauty, lakes, forests, and wildlife, among other natural amenities, and coupled with built amenities such as golf courses, are experiencing robust economic growth. It is not clear if these patterns extend to rural Appalachia. In this applied research study we use data for rural U.S. counties. We estimate an augmented Carlino-Mills growth model with specific attention to growth patterns of Appalachia. We also build on the empirical modeling by adopting a Bayesian Modeling Average (BMA) approach to address the problem of model specification. We find that while there are some commonalities across the whole of the United States, the country is sufficiently heterogeneous that impact of amenities or other policy variables may be significantly different depending on where one is within the country. Our results suggest that while non-metropolitan Appalachia tends to follow national trends, there are sufficient differences that warrant special attention.Key Words: amenities, quality of life, rural economic growth, BayesianThe importance of amenities and overall quality of life in explaining rural growth patterns is becoming widely accepted within the rural growth literature (Power 1988, Power and Barrett 2001, OECD 1994, McGranahan 1999, Isserman 2000, Deller and Tsai 1999, Dissart and Deller 2000, Green 2001, Marcouiller, Deller, and Green 2005, Green, Deller, and Marcouiller 2005. Both descriptive analysis (e.g., McGranahan 1999) and more advanced statistical modeling approaches (e.g., Deller et al. 2001, Marcouiller, Kim, and Deller 2004 have consistently found that rural areas that are endowed with natural and built amenities such as scenic beauty, wildlife, and recreational and tourism attributes experience higher rates of structural change and economic growth than the U.S. average. Unfortunately, much of the current thinking is based on empirical evidence with little if any theoretical foundations (Power 1996(Power , 2005.Using traditional neoclassical growth theory, Marcouiller (1998) and Marcouiller and Clendenning (2005) suggest that natural amenities and quality of life factors act as non-market latent inputs into regional economic growth and development. As our national economy has moved from goods-to service-producing, the impact on rural America has been pronounced. No longer do traditional extractive industries (i.e., agriculture, forestry, mining, etc.) or manufacturing form the backbone of the rural economy. Today, capital is no longer viewed as simply the machinery or public infrastructure used in production, but rather the more relevant form of capital takes a latent non-market attribute. The importance of a forest to a regional economy, for example, is no longer just timber production but rather the natural amenities and recreational attributes of the forest (White and Hanink 2004).

Impacts of national forests in the West on county population and employment

“…Percent earnings from both the services and retail sectors had a positive effect on employment growth. Employment growth was found to be positively influenced by an area's education level, similar to Duffy-Deno (1998), Deller and Lledo (2007) and Eichman et al (2010). Higher average wages deter employment growth; the negative and significant coefficient is in line with the expectation that employers would seek out low wage areas.…”

“…Duffy-Deno (1998), Lewis et al (2002) and Deller and Lledo (2007) demonstrate how regional economists have attempted to capture the impact national forests exert on regional development. While each article reviewed different study areas and included varying exogenous factors, all three used a version of the Carlino and Mills model and guided the development of our study.…”

“…In Oregon, Chen and Weber (2011) found that proximity to protected lands increased population in the 1990's. Deller and Lledo (2007) use a principal component method to assess the influence of combined amenity values in rural Appalachia, an area which is both historically dependent on extractive industries and well-endowed with natural amenities. Their results show that depending on location, land characteristics are significant in explaining income growth.…”

“…Following the trend established by Duffy-Deno (1998), Lewis et al (2002) and Deller and Lledo (2007), this study will use the Carlino and Mills model to test our hypothesis that decreases in timber sales from national forests have a statistically significant and negative influence on county-level employment growth.…”

The role of landscape amenities in regional development: Evidence from Swiss municipality data

“…Duffy-Deno (1997b) includes the number of state parks per acre in his model. A different approach for measuring landscape amenity endowment is the construction of indices using principal component analysis (Deller et al, 2001;Kim et al, 2005;Deller and Lledo, 2007;Park et al, 2009). This method allows to break down a vari- Table 1 Studies investigating the role of landscape features in regional development.…”