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Shift-Share Instruments and the Impact of Immigration

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  • David A. Jaeger
  • Joakim Ruist
  • Jan Stuhler

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' past geographic 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 A. Jaeger & Joakim Ruist & Jan Stuhler, 2018. "Shift-Share Instruments and the Impact of Immigration," NBER Working Papers 24285, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24285
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    Cited by:

    1. Anthony Edo, 2017. "The Impact of Immigration on Wage Dynamics: Evidence from the Algerian Independence War," Working Papers 2017-13, CEPII research center.
    2. Xie, Bin, 2017. "The Effects of Immigration Quotas on Wages, the Great Black Migration, and Industrial Development," IZA Discussion Papers 11214, Institute for the Study of Labor (IZA).
    3. Paul Goldsmith-Pinkham & Isaac Sorkin & Henry Swift, 2018. "Bartik Instruments: What, When, Why, and How," NBER Working Papers 24408, National Bureau of Economic Research, Inc.
    4. Anthony Edo, 2017. "The Impact of Immigration on Wage Dynamics: Evidence from the Algerian Independence War," CESifo Working Paper Series 6595, CESifo Group Munich.
    5. Escarce, José J. & Rocco, Lorenzo, 2018. "Immigration and the Health of Older Natives in Western Europe," GLO Discussion Paper Series 228, Global Labor Organization (GLO).
    6. Fernández-Huertas Moraga, Jesús & Ferrer-i-Carbonell, Ada & Saiz, Albert, 2017. "Immigrant Locations and Native Residential Preferences: Emerging Ghettos or New Communities?," IZA Discussion Papers 11143, Institute for the Study of Labor (IZA).
    7. Jason Anastasopoulos & George J. Borjas & Gavin G. Cook & Michael Lachanski, 2018. "Job Vacancies and Immigration: Evidence from Pre- and Post-Mariel Miami," NBER Working Papers 24580, National Bureau of Economic Research, Inc.

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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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