Executive Summary (excerpt)

From the early 19th century, Appalachia was the primary U.S. coal producer, but over the course of the last century, its coal industry evolved and ultimately faded from market dominance. This transition took a very long time, and spanned periods of boom and bust, new mine openings and mine closures, as well as wide-ranging economic development unrelated to coal, all of which shaped coal sector employment in the region’s coal communities. During the past 70 years, coal sector performance exhibited significant heterogeneity in the timing of coal-related business cycles and in spatial concentration. The 1950s and most of the 1960s saw the closure of many marginally-productive mines on the outer fringes of Appalachia, squeezed out by technology-aided competitors. Many Appalachian counties experienced a surge in coal employment during the 1970s, followed by mine closures during the “bust” years of the 1980s and during the 1990s with the tightening of environmental regulations.

Appalachia’s reign as the principal coal region of the U.S. has considerably waned in recent decades. The coal economy-based Appalachian region has historically been poorer than much of the U.S. For decades, it had some of the lowest per-capita income levels and highest poverty rates in the country (Lobao et al. 2016). When coal production began to shift west in the late 1960s, Appalachia’s mines began to struggle. By 1998, Appalachia’s share of U.S. coal production had fallen by more than half to 41 percent, and continued to decline, reaching 27 percent in 2018 (EIA 2019). Meanwhile, its national share of coal employment declined from 85 percent in 1954 to 57 percent in 2018.

The declining fortunes of the coal industry has exposed Appalachian communities to severe negative economic shocks. Despite declining share, Appalachia’s coal-country remains quite vulnerable to the fortunes of coal mining. During the coal industry’s rise, communities across Appalachia became dependent on the coal economy and coal employment, whether in coal mining or in associated coal supply chains. The severe and ongoing decline of the sector has resulted in widespread economic dislocation, requiring communities to adjust to new market realities. The extent and timing of the adjustment varies from one county to the next, as do the resulting economic outcomes. The Appalachian Regional Commission (ARC), which operates in 13 states and 420 counties, was established in 1965 to address these issues.

This study identifies Appalachian counties that have successfully transitioned from dependence on coal while sustaining growth, and assesses factors that facilitate more successful community transition. The key goal is to determine why some communities perform better to draw lessons for other communities facing transition challenges. The criteria we use to define “successful” transition are (a) a near total phase-out of coal jobs from a previous level of dependence, and (b) a shift to alternative economic activities sufficient to sustain a growing population with rising household incomes and thus improving economic well-being.

We identify the main variables associated with successful economic transition, based on evidence from a wide-ranging literature review. We examine the large body of literature on the impact of resourcedependence on economic development in Appalachia and elsewhere, the economics of boom and bust cycles, challenges related to the so-called “natural resource curse” and lagging regions. We reach beyond the traditional economics literature to include geography, demography, and sociology. We measure performance on key variables across the 420 ARC counties and rank the best performing counties. Four counties emerge as “successful” under our criteria: Athens and Noble Counties in Ohio; Laurel County, Kentucky; and Sequatchie County, Tennessee.

We check the validity of our initial results by examining the performance of these counties along other metrics of community well-being, such as population growth rate, mining and coal employment shares, median household income. We also compare their performance to average performance of three sub-groups of ARC counties: those with the top-10 fastest growing populations, the 10 counties that comprise median-growers, and the 10 counties that are the slowest growers. In a second check of robustness, we assess additional factors deemed in the literature to contribute to local economic development: agglomeration economies, human capital, economic diversification, population age structure, proximity to metropolitan areas, natural amenities, extent of urbanization, topography, inequality, unemployment, minority population share, social capital, government capacity, and health outcomes. We assess the extent to which these factors may have contributed to successful transition for each of the four counties.

Finally, we complement our quantitative findings with case-studies on each “successful” Appalachian county (and one non-Appalachian county, for comparison). Our case study approach combines qualitative methods (key informant interviews), with secondary sources to shed light on the opportunities and resources within each community that likely contributed to relative transition success. These “deepdive” assessments focus especially on the role of distance to larger urban centers, road infrastructure, local non-mining economic activity, local government institutional capacity, and local social capital networks.

The following conclusions emerge from our combined analysis:

• Very few Appalachian counties have managed a positive transition from coal dependence. Of 222 ARC counties with a high level of coal activity at some the period after 1950, only four counties managed to transition out of coal and remain economically viable communities with sustained population growth.
• In terms of economic well-being, the level of success of the four counties is modest. While the four counties have grown in population and diversified their production, and most have experienced significant poverty reduction, average household incomes remain low and poverty rates exceed national and ARC averages.
• Severe economic structural impediments across Appalachia constrain growth. Being small and remote, most ARC counties have limited access to labor markets with more and diverse job opportunities. ARC counties have low levels of physical capital, especially infrastructure, and high transportation costs. Human capital is also low, with lower educational attainment and lower quality education and health services.
• Non-structural impediments reinforce poor economic outcomes and reduce local economic resilience. Historically coal-dependent communities exhibit less economic diversification, modest manufacturing activity, problematic patterns of “boom and bust” cycles, and low levels of entrepreneurship.
• Institutional capacity and social capital have helped some counties transition more successfully. Local government institutional capacity and social capital are generally low across the ARC region compared to national averages. Our case studies highlight examples where local government capacity to design, finance, and implement economic development initiatives in collaboration with local civil society appears to have helped sustain transition impetus.
• Transition paths in our four “successful” Appalachian counties each have their own unique features and success factors, making it difficult to generalize approaches for other counties. Athens County’s economic development has centered around its large public Ohio University which supports direct and indirect jobs and generates local social capital. Noble County was able to attract a large public investment to build a state prison, which has served as an economic driver. While infrastructure investment is a common theme in our successful counties, this is not sufficient to guarantee successful transition from coal as much of Appalachia has received significant investment, at least with respect to road infrastructure. That said, improved roads helped our four successful counties by increasing connectivity to larger metropolitan areas, manufacturing chains, and to living, tourism, and recreational opportunities. Laurel County became a regional hub following investment to construct two major highways—including Interstate-75, which linked the area to northern manufacturing centers—as well as a regional airport, a hydroelectric power dam, piped water supply, and industrial parks. Sequatchie County benefited from investments in highways to access nearby Chattanooga, a large metropolitan market offering diverse job opportunities.
• Our ability to draw specific policy lessons based on the economic development patterns in Appalachia is limited. This would require assessing general and coalspecific policies at the county, regional, state, and federal levels, as well as employers’ and workers’ incentives in the region, and fiscal and public investment stances and capacity of particular counties or states. This is beyond the scope of our research.

Nonetheless, our analysis highlights some broad policy areas for addressing common economic development impediments in Appalachia:

• Enhance connectivity: Infrastructure investments alone are not enough to ensure successful community transition from coal dependence. But remote communities need connectivity—whether in the form of roads or digital connections—to larger markets to grow, achieve scale economies, match excess labor with nearby job markets, and even to connect people to recreation and tourism opportunities.
• Invest in human capital: Enhancing human capital through investments in education and health will improve residents’ wellbeing and help raise workers’ productivity, allowing them to compete for better, higherskilled jobs and generate more added value. In the absence of employer labor demand, however, human capital investments may have negligible returns and risk frustrating workers with heightened expectations for jobs that are not locally available. Successful investments in education and training align curricula to identified private sector needs and/or focus on building entrepreneurial capacity.
• Seek economic diversification to ease “boom and bust” cycles: Coal-dependent communities must move beyond volatile coal “boom-bust” cycles associated with longterm economic and social costs. Government and civil society must facilitate new economic activities and attract investments in new, job-creating firms that serve local or regional markets or beyond.
• Build local institutional capacity: Diversifying sectors of economic activity requires institutional capacity to develop a suitable business environment. This includes designing and enforcing the right mix of rules and regulations and providing public goods consistent with economic development, but also coordinating with local stakeholders and regional agencies to stimulate private sector activities, such as through investment incentives or promoting public-private partnerships (PPP) in priority sectors.
• Coordinate economic development strategies: Counties that are economically constrained need a coordinated set of economic development strategies and approaches to (a) foster larger economic agglomeration and/or linkages to larger regional/national/global markets, and (b) exploit natural amenities in a sustainable manner that can attract demand for local services. Not all communities are equally endowed, so policymakers will have to weigh tradeoffs between propping up very small communities and investing in areas with higher potential. This will require deep analysis of communities’ longterm sustainability, and consideration of alternative approaches, such as programs to facilitate out-migration.

This report was published by the World Bank on October 25, 2021. Read the full report here.

About the Authors

Oudom Hean

Assistant Professor of Finance and Faculty Scholar in the Sheila and Robert Challey Institute for Global Innovation and Growth at North Dakota State University

Author Bio        oudom.hean@ndsu.edu 

Linda Lobao

Professor of Rural Sociology, Sociology, and Geography at The Ohio State University

Mark Partridge

C. William Swank Chair of Rural-Urban Policy and Professor of Economics at The Ohio State University

Paige Kelly

Doctoral student in the School of Environment and Natural Resources at The Ohio State University

Seung-hun Chung

Doctoral student and postdoctoral researcher in the Department of Agricultural, Environmental, and Development Economics at The Ohio State University

Elizabeth Ruppert Bulmer

Senior Economist in the Jobs Group at the World Bank

Citation

Lobao, Linda; Partridge, Mark; Hean, Oudom; Kelly, Paige; Chung, Seung-hun; Ruppert Bulmer, Elizabeth N. Socioeconomic Transition in the Appalachia Coal Region: Some Factors of Success (English). Washington, D.C.: World Bank Group.