Bartik Instruments: What, When, Why, and How
American Economic Review
vol. 110,
no. 8, August 2020
(pp. 2586-2624)
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.Citation
Goldsmith-Pinkham, Paul, Isaac Sorkin, and Henry Swift. 2020. "Bartik Instruments: What, When, Why, and How." American Economic Review, 110 (8): 2586-2624. DOI: 10.1257/aer.20181047Additional Materials
JEL Classification
- C51 Model Construction and Estimation
- F14 Empirical Studies of Trade
- J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
- J22 Time Allocation and Labor Supply
- L60 Industry Studies: Manufacturing: General
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
- R32 Other Spatial Production and Pricing Analysis