Document Type

Working Paper

Publication Date



Regional Research Institute

Document Number



Regional Research Institute


In this paper we investigate the effects of federal spending on earnings change in Appalachian counties during the 1983-88 recovery and 1989-92 recession. Specifically, we explore the effects of federal spending from grants/research, procurement, salary/wages and defense. The analysis controls for key concepts in the human ecology and new urban sociology. The dependent variables are earnings change for each business cycle from a shift-share analysis, which decomposes county earnings change into that from nationally declining industries. The analysis shows that federal spending has no effect on earnings change, when it is considered as an aggregate measure. However, when federal spending is reclassified into the four categories, spending for grants/research has a positive effect on both measures of earnings change in the 1982-88 recovery. Moreover, the effects of grants/research spending are dependent upon the education level of the county population. However, education by grants/research interaction effect is specific to nonmetro counties in Appalachia. Implications for future research are discussed.