Effect of the increase in energy prices on employment in Italy: Sector level evidence

This study investigates the effect of the increase in energy prices on employment in Italy, focusing on the period from 2019 to 2023. Italy's dependence on fossil fuel-related energy and vulnerability to geopolitical and global health crises, such as the Covid-19 pandemic and the Russia-Ukraine war, have exposed its economy to significant energy price shocks. An event study model is employed to analyze the effects of energy price volatility on employment across 19 sectors and 57 subsectors, using energy exposure in 2019 as a reference to isolate pre-existing conditions. The findings reveal a negative and statistically significant relationship between initial energy exposure and employment growth in 2021, 2022, and 2023, with the most pronounced effects in 2021. These results underscore the vulnerability of energy-intensive sectors to external shocks and highlight the long-term economic implications of energy price volatility on Italy's labor market. Robustness tests confirm the validity of these findings, offering critical insights for policymakers aiming to mitigate the economic impact of energy price fluctuations.