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Reallocation and Productivity Dynamics in the Appalachian Region

Author

Listed:
  • Lucia Foster
Abstract
The Appalachian Region has long suffered from poor economic performance as measured over a variety of dimensions. Even as the region has improved over the last few decades, Appalachia still lags behind the nation. A growing body of empirical work has found that reallocation is pervasive in the U.S. economy and is an integral component of economic growth. Productivity growth is improved when resources are shifted from less productive establishments towards more productive establishments either through changes in existing establishments or through the births and deaths of establishments. Establishments that use new products, technologies, and production processes replace establishments that do not in a continual process of creative destruction. Using establishment-level data, this paper examines the reallocation and productivity dynamics of the Appalachian Region. The first part of the paper compares the reallocation dynamics of Appalachia to the rest of the U.S. using a newly developed establishment-level database that covers virtually the entire U.S. economy. From this analysis, it is apparent that establishment birth and death rates and job creation and destruction rates for Appalachia are consistently below those for the rest of the U.S.. The second part of the paper uses data from the Economic Censuses to determine whether the establishment and employment dynamics of the Appalachian Region are also qualitatively different (in terms of their productivity rankings) from their U.S. counterparts. It appears that the North subregion of Appalachia has reallocation and productivity dynamics that are consistent with an impeded creative destruction story.

Suggested Citation

  • Lucia Foster, 2006. "Reallocation and Productivity Dynamics in the Appalachian Region," Working Papers 06-03, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:06-03
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    File URL: https://www2.census.gov/ces/wp/2006/CES-WP-06-03.pdf
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    References listed on IDEAS

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    1. Eric J. Bartelsman & John Haltiwanger & Stefano Scarpetta, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," Tinbergen Institute Discussion Papers 04-114/3, Tinbergen Institute.
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    5. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372, National Bureau of Economic Research, Inc.
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    8. Lucia Foster & John Haltiwanger & C. J. Krizan, 2006. "Market Selection, Reallocation, and Restructuring in the U.S. Retail Trade Sector in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 748-758, November.
    9. Lucia Foster, 2003. "Establishment and Employment Dynamics in Appalachia: Evidence from the Longitudinal Business Database," Working Papers 03-19, Center for Economic Studies, U.S. Census Bureau.
    10. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau.
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    Cited by:

    1. Ruohan Wu, 2022. "Transitioning Economic Statuses of Appalachian Counties during COVID-19," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 50(3), pages 147-158, December.

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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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