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Shift- Share Instruments and the Impact of Immigration

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Listed:
  • David Jaeger

    () (CUNY Graduate Center)

  • Joakim Ruist

    () (University of Gothenburg)

  • Jan Stuhler

    () (Universidad Carlos III de Madrid)

Abstract

A large literature exploits geographic variation in the concentration of immigrants to identify their impact on a variety of outcomes. To address the endogeneity of immigrants’ location choices, the most commonly-used instrument interacts national inflows by country of origin with immigrants’ pastgeographic distribution. We present evidence that estimates based on this “shift-share†instrument conflate the short- and long-run responses to immigration shocks. If the spatial distribution of immigrant inflows is stable over time, the instrument is likely to be correlated with ongoing responses to previous supply shocks. Estimates based on the conventional shift-share instrument are therefore unlikely to identify the short-run causal effect. We propose a “multiple instrumentation†procedure that isolates the spatial variation arising from changes in the country-of-origin composition at the national level and permits us to estimate separately the short- and long-run effects. Our results are a cautionary tale for a large body of empirical work, not just on immigration, that rely on shift-share instruments for causal inference.

Suggested Citation

  • David Jaeger & Joakim Ruist & Jan Stuhler, 2018. "Shift- Share Instruments and the Impact of Immigration," CReAM Discussion Paper Series 1802, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  • Handle: RePEc:crm:wpaper:1802
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    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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