The economic performance of Appalachian counties in the USA varies substantially across the region. The Appalachian Regional Commission has divided the 410 counties into four major categories: distressed, transitional, competitive, and attainment. This paper applies spatial models that account for spatial interdependence to evaluate the impact of Appalachian highways on economically disparate counties. Using a spatial autoregressive model in a production function framework, it is found that distressed counties gain from highways whereas competitive counties actually suffer from a negative backwash effect that tends to draw productive activity away from these counties into neighboring counties.