Trade shocks and agri-food local labor markets

Abstract This study examines the impact of imports and exports on regional labor markets in the agricultural and food manufacturing sectors in the European Union (EU) between 1995 and 2019. We exploit inter-regional variation in trade exposure based on initial industrial specialization, employing recent advances in the shift-share research design. Our estimates suggest that a 1 per cent increase in imports corresponds to a 0.4 per cent decline in regional agri-food employment, while a 1 per cent increase in exports is associated with a 0.16 per cent employment gain. These effects are not uniform across sectors: employment responses are highly significant in the food manufacturing sector, whereas no statistically significant effects are detected in agriculture. This suggests that downstream food processing industries are more sensitive to international trade dynamics than primary agriculture. Further analysis by trade partner group shows that the net employment effect of trade with EU15 countries is negative, driven by import-related job losses in both agriculture and food manufacturing. In contrast, export expansion to New Member States and China is linked to net job creation in that sector. However, since not all trade shocks in our setting originate from external sources of variation, only trade effects involving non-EU partners can be interpreted as causal, while results related to intra-EU trade should be viewed as robust association.