An empirical examination of shift‐share instruments
Year: 2020
Type: article
Abstract: Bartik's (1991, 1993) approach to identifying shocks in demand to regional economies has been used extensively for nearly 30 years. We chronicle the development of Bartik‐type shift‐share instruments and examine the empirical performance of alternative versions that use different combinations of national shift and local share variables in their construction. We offer three main findings. First, instruments constructed from shares that omit employment in nontraded sectors empirically dominate versions that include total employment. Second, industrial sectors with high average shares and low variation across areas are more likely to be nontraded and endogenous. This suggests placing large weights on nontraded sector shares worsens both relevance and potential endogeneity. Finally, we demonstrate national shifters other than employment, such as prices and wages, can be used to construct instruments with unique and relevant explanatory power.
Source: Journal of Regional Science
DOI: 10.1111/jors.12481
Authors: Daniel A. Broxterman, William D. Larson
Institutions: Florida State University, Federal Housing Finance Agency
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2999414186