A County-Level Assessment of Entrepreneurship and Economic Growth in Appalachia Using Simultaneous Equations

This study provides evidence of the contribution of entrepreneurship to economic development in Appalachia. Using data on Appalachian counties, a system of simultaneous equations is empirically estimated to measure the effects of entrepreneurship on economic growth and development. We present an expanded Carlino-Mills growth model using changes in population, employment, and per capita income to represent growth. The goal of the investigation is to increase the understanding of entrepreneurship’s contributions to economic growth, and its potential as a development strategy for a region, such as Appalachia, that is characterized by poverty and underdevelopment. The results show that start-up businesses contribute significantly to determining population growth. Employment growth is positively affected by self-employment rates as well as by firm formation rates.