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Title: Quasi-Experimental Shift-Share Research Designs

Author(s): Kirill Borusyak, Peter Hull and Xavier Jaravel

Publication Date: August 2020

Keyword(s):

Programme Area(s): International Trade and Regional Economics and Labour Economics

Abstract: Many studies use shift-share (or "Bartik") instruments, which average a set of shocks with exposure share weights. We provide a new econometric framework for shift-share instrumental variable (SSIV) regressions in which identification follows from the quasi-random assignment of shocks, while exposure shares are allowed to be endogenous. The framework is motivated by an equivalence result: the orthogonality between a shift-share instrument and an unobserved residual can be represented as the orthogonality between the underlying shocks and a shock-level unobservable. SSIV regression coefficients can similarly be obtained from an equivalent shock-level regression, motivating shock-level conditions for their consistency. We discuss and illustrate several practical insights delivered by this framework in the setting of Autor et al. (2013).

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Bibliographic Reference

Borusyak, K, Hull, P and Jaravel, X. 2020. 'Quasi-Experimental Shift-Share Research Designs'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15212