When President Lyndon Johnson attempted to galvanize public support for his War on Poverty, he traveled on April 24, 1964 to the little town of Inez, located in Martin County, Kentucky. Through that visit, Americans saw poverty that shocked them. Indeed, the 1970 Census found the per capita personal income of Martin County was only 34.5 percent that of the United States as a whole. By the next census, however, Martin County's per capita income, riding the OPEC-induced coal boom, was 80.5 percent of the national average. But as the price of oil dropped, western states increased their coal production, and technological advances in the coal industry decreased mining employment. Martin County's economy declined until, by the 2000 Census, its per capita income was only 54.7 percent of the national average.

While Martin County, with its severe poverty, may fit the American stereotype of Appalachia, the region is considerably more complex. Appalachia comprises 13 different states and stretches from central New York to central Mississippi. It includes large cities such as Pittsburgh and small villages such as Inez. In this article, we explore the performance of the Appalachian economies during the 1990s and then examine how these economies fared over a longer horizon, from 1970 to 2000.

Aims

The aims of this article are two-fold. First, it examines the performance of the Appalachian economy and how residents of Appalachia have fared between 1990 and 2000. The article will describe Appalachia as a whole as well as its important subregions, which are defined geographically-southern Appalachia, central Appalachia, and northern Appalachia. The economic classifications of these subregions are then defined either by their economic structure or their level of economic distress. Of course, the industrial structure or level of economic distress of counties can change over time, so when analyzing this type of classification we need to ask certain questions, such as: "How did counties that were distressed in 1990 fare over the next 10 years?" We have to define a base year to construct the level of distress of an area or its industrial composition and then follow this area over time. For the first part of our analysis we define 1990 as the base year and measure changes between 1990 and 2000. What defines the level of economic distress or the industrial composition is discussed in great detail below.

Our second aim is to put the current economic conditions in historical context by comparing Appalachia to areas that are historically similar in terms of economic distress and economic structure. Through this analysis, we hope to answer the question: "How has Appalachia fared over the last 30 years relative to areas that historically faced similar conditions?" We also hope to begin to understand why disparities between Appalachia and historically similar areas have occurred.

Background

During the 1980s, Appalachian families experienced rising rates of poverty and growing income inequality. These trends reflected trends that held in the United States as well. For instance, for the United States as a whole, the poverty rate increased from 13.0 percent in 1980 to 13.2 percent in 1990, while in Appalachia the poverty rate increased from 14.1 percent in 1980 to 15.4 percent in 1990. For the United States as a whole, there is mounting evidence that, beginning in the mid-1990s, after nearly 20 years of rising income inequality and poverty, a slow but steady decline in both statistics occurred. For instance, by 2000 the poverty rate fell to 12.4 percent for the United States as a whole and to 13.7 percent for Appalachia. Figure 1 shows national trends both in the number in poverty and in the poverty rate.

Figure 1: Number of Poor and Poverty Rate: 1959 to 2002

View data on number of poor and poverty rate from 1959 to 2002 in table format.
(Viewing this data requires the program Microsoft Excel.)

The reasons for the rise and fall in poverty and income inequality are far from clear. Prominent economists have investigated the role of globalization, increased international trade, de-industrialization, and technical change, but there has been no definitive resolution to the question. One prevailing theory is that growth in the economy takes some time to help those individuals who are the least skilled, and the unprecedented prosperity of the United States over the last 20 years took many years to raise the level of prosperity of the least skilled.

There are only a handful of papers investigating trends in income inequality and poverty on a regional level from 1970 to 1990, even though there are tremendous differences across regions in their percentages of residents in poverty, their levels of income inequality, and their degrees of sustained economic prosperity. (See the following for a review of regional booms and slumps through the 1980s: Oliver J. Blanchard and Lawrence F. Katz, "Regional Evolutions," Brookings Papers in Economic Activity 1 (1992): 1-75. For a specific look at a region of Appalachia, see the following: Dan A. Black, Terra McKinnish, and Seth G. Sanders, "The Economic Impact of the Coal Boom and Bust," Economic Journal, forthcoming.) There is virtually no work on these issues on a regional basis over the 1990s.