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Bartik Instruments: What, When, Why, and How

Author

Listed:
  • Paul Goldsmith-Pinkham
  • Isaac Sorkin
  • Henry Swift

Abstract

The Bartik instrument is formed by interacting local industry shares and national industry growth rates. We show that the typical use of a Bartik instrument assumes a pooled exposure research design, where the shares measure differential exposure to common shocks, and identification is based on exogeneity of the shares. Next, we show how the Bartik instrument weights each of the exposure designs. Finally, we discuss how to assess the plausibility of the research design. We illustrate our results through two applications: estimating the elasticity of labor supply, and estimating the elasticity of substitution between immigrants and natives.

Suggested Citation

  • Paul Goldsmith-Pinkham & Isaac Sorkin & Henry Swift, 2020. "Bartik Instruments: What, When, Why, and How," American Economic Review, American Economic Association, vol. 110(8), pages 2586-2624, August.
  • Handle: RePEc:aea:aecrev:v:110:y:2020:i:8:p:2586-2624
    DOI: 10.3886/E117405V1
    Note: DOI: 10.1257/aer.20181047
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    References listed on IDEAS

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    1. Jaeger, David A & Ruist, Joakim & Stuhler, Jan, 2018. "Shift-Share Instruments and the Impact of Immigration," CEPR Discussion Papers 12701, C.E.P.R. Discussion Papers.
    2. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, December.
    3. Simon Galle & Andrés Rodríguez-Clare & Moises Yi, 2017. "Slicing the Pie: Quantifying the Aggregate and Distributional Effects of Trade," NBER Working Papers 23737, National Bureau of Economic Research, Inc.
    4. Jerry A. Hausman & Whitney K. Newey & Tiemen Woutersen & John C. Chao & Norman R. Swanson, 2012. "Instrumental variable estimation with heteroskedasticity and many instruments," Quantitative Economics, Econometric Society, vol. 3(2), pages 211-255, July.
    5. Nathan Nunn & Nancy Qian, 2014. "US Food Aid and Civil Conflict," American Economic Review, American Economic Association, vol. 104(6), pages 1630-1666, June.
    6. Kirill Borusyak & Peter Hull & Xavier Jaravel, 2018. "Quasi-Experimental Shift-Share Research Designs," Papers 1806.01221, arXiv.org, revised Aug 2020.
    7. Sarah R. Cohodes & Daniel S. Grossman & Samuel A. Kleiner & Michael F. Lovenheim, 2016. "The Effect of Child Health Insurance Access on Schooling: Evidence from Public Insurance Expansions," Journal of Human Resources, University of Wisconsin Press, vol. 51(3), pages 727-759.
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    10. Christian,Paul J. & Barrett,Christopher B., 2017. "Revisiting the effect of food aid on conflict : a methodological caution," Policy Research Working Paper Series 8171, The World Bank.
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    More about this item

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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