Before adding a shadow effect you must first select the area that the effect will be applied to. To do that you first have to increase the image margins and then add the shadow. This is very simple to do:

1) Open the desire image.
2) Click on the Image -> Board Size & Resolution... menu
3) On the Board Size & Resolution screen set the With to 110% and the height to 110% and select white bg color. Click ok when done. (this action will create a margin around the original image).
4) Using the selection tool select the image area.
5) Click on the Effects -> Light -> Shadow... menu. On the Shadow screen set the desire options and click ok to finish.

Tip: Another and faster way (one click action) to preform effect similar to shadow is by using a mask frame:
1) Open the desire image.
2) Click on the Tools -> Frames -> Add Frame (Mask Type)... menu. On the Add Frame (Mask Type) screen select the frame named "Classic+Shadow.jpg" and click ok to finish.