Employment and Business Establishment Growth in the Appalachian Region, 2000-2008: An Application of Smooth Transition Spatial Autoregressive Models

Industry clusters can be important components of regional development. The effects of industry clusters on growth typically vary across geography, which has implications for targeted development strategies. Employment and business establishment growth in the Appalachian region (2000 – 2008) was regressed on industry cluster concentration indexes controlling for local determinants. The hypothesis that local response to growth determinants is geographically heterogeneous was tested using Smooth Transition spatial process models. This class of models exhibiting regime switching behavior is useful for identifying regional clusters, providing another tool for exploring relationships between geographical determinants and economic growth.