How agricultural subsidies shape local employment: Evidence from the French support policies for mountain areas - Discussion paper

Abstract Do place-based farm subsidies reshape rural labour markets beyond agriculture? We estimate the causal impact of France’s Less Favoured Areas (LFA) on municipal employment over 1962–1990. Combining entropy balancing with staggered difference-in-differences on 23,685 municipalities, we differentiate the effects on salaried versus self-employed farm labour and also estimate geographic spillovers and sectoral multipliers. LFA municipalities gain about 10% salaried agricultural jobs but lose roughly 18% self-employment as farms merge and expand. Positive spillovers extend to neighbouring municipalities, treated or not, and multipliers occur in non-farm sectors: industry, trade, and services grow around subsidised areas, while agri-food and construction rise inside them. Treatment heterogeneity shows stronger gains where farms are mid-sized and close to urban centers. By revealing job-creating but composition-shifting and geographical and sectoral outward-spreading effects,our study highlights that a policy designed to offset natural handicaps also reconfigures local labour markets and local linkages. JEL Classification: C21, Q18, R12 Keywords: Rural employment, Spillovers, Entropy Balancing, Less Favoured Areas. Citation DABOU, Y., Le Gallo, J., & VEDRINE, L. (2026). How agricultural subsidies shape local employment: Evidence from the French support policies for mountain areas - Discussion paper (Version v01). BrightSpace Horizon Europe project Grant Agreement No. 101060075. https://doi.org/10.5281/zenodo.19733535 ----------------- Funding acknowledgement Funded by the European Union. Grant Agreement No. 101060075. Views and opinions expressed are those of the authors only and do not necessarily reflect those of the European Union or the European Commission. Neither the European Union nor the granting authority can be held responsible for them. Legal notice This document was produced under the terms and conditions of Grant Agreement No. 101060075 for the European Commission. It does not necessary reflect the view of the European Union and in no way anticipates the Commission’s future policy in this area. The European Commission is not liable for any consequence stemming from the reuse of this publication. © BrightSpace, 2026 The reuse of this document is authorised under a Creative Commons Attribution 4.0 International (CCBY 4.0) licence (https://creativecommons.org/licenses/by/4.0/). This means that reuse is allowed provided appropriate credit is given and any changes are indicated. For any use or reproduction of elements that are not owned by the BrightSpace consortium, permission may need to be sought directly from the respective right holders. Project information BrightSpace Horizon Europe project Grant Agreement No. 101060075 https://cordis.europa.eu/project/id/101060075 CALL: Innovative governance, environmental observations and digital solutions in support of the Green Deal WORK PROGRAMME Topic ID: HORIZON-CL6-2021-GOVERNANCE-01-12 EU agriculture within a safe and just operating space and planetary boundaries BrightSpace Project coordination: Wageningen Economic Research, The Hague, NL Contact: brightspace.wser@wur.nl | Website: www.brightspace-project.eu Project duration: 1 November 2022 – 31 October 2027.