I spent some time in the armpit of the Ozarks in 2000. I was staying with a Special Needs teacher who told me that as long as she lived in Arkansas, she'd never be out of work.
However, rumours get spread around about different parts of America, generally associated with rural, undeveloped areas, for all sorts of reason, not least to give people living in Upstate New York a sense of superiority. Similar claims have been made about isolated rural communities in Kentucky, West Virginia, and South Carolina, with little to no actual evidence to back it up.
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Although the public and many social scientists have long assumed that isolated hill folk often marry their cousins, and some certainly do (ask the Fugates), research on the subject is pretty thin. The most comprehensive look I've found is a 1980 paper ("Night Comes to the Chromosomes [etc]," Central Issues in Anthropology) by Robert Tincher, who at the time was a grad student at the University of Kentucky. Having dug through 140 years' worth of marriage records in a remote four-county region of eastern Kentucky, Tincher argues that (a) yeah, cousin marriage happens in the hill country, but (b) rates vary widely from place to place and even among families in a given district, and (c) it isn't conspicuously more prevalent than in a lot of other places. Point (c) isn't all that persuasive; Tincher's numbers show that as late as 1950 inbreeding was well above what could be accounted for by chance--married couples on average were approximately third cousins. However, the rate had dropped sharply since the peak after the Civil War, when the average couple were somewhere between second cousins and second cousins once removed. What's more, the rate fell quickly after 1950--no doubt due to postwar prosperity, urbanization, and so on--and by 1970 was no higher than you'd likely find in the general population.
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-http://www.straightdope.com/columns/read/2621/are-there-inbred-families-in-the-ozarks-appalachians-like-in-em-deliverance