How agricultural subsidies shape local employment: Evidencefrom the French support policies for mountain areas

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 farmlabour and also estimate geographic spillovers and sectoral multipliers. LFA municipalitiesgain 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 locallabour markets and local linkages. JEL Classification: C21, Q18, R12