Is the Protected Designation of Origin (PDO) Policy Successful in Sustaining Rural Employment

Abstract

This paper seeks to establish whether public agro-food interventions like food quality labels contribute or not to the promotion of rural employment. To this end, the paper uses original longitudinal firm and plant level datasets on the French cheese industry to assess the impact of the Protected Designation of Origin (PDO) label on rural employment. The data is used to test the impact of the PDO label on equilibrium market structure in the downstream cheese processing segment, and to establish backward linkages this segment has on upstream plant-level employment and the number of dairy farmers. Our results show that the PDO label has increased the equilibrium number of firms at the national level, because the introduction of this label has created market segmentation which reduced barriers to entry. In turn, this higher number of cheese firms resulted in more employment in dairy farms and processing plants at the district level. However, the PDO label exerts pressure on farmers to abide by strict production techniques, which may cause exit due to cost increases. Yet our estimates show that the employment benefits of this label outweigh the potential losses it might create due to its product specification stringency.