Working Paper: NBER ID: w24408
Authors: 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 three applications: estimating the elasticity of labor supply, estimating local labor market effects of Chinese imports, and estimating the elasticity of substitution between immigrants and natives.
Keywords: Bartik instrument; labor supply elasticity; economic shocks; identification strategy
JEL Codes: C1; C18; C2; J0; J2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local industry shares (zlk) (L89) | error term (el) (C51) |
| Bartik instrument (Y10) | employment growth (O49) |
| Bartik instrument (Y10) | wage growth (J31) |
| national growth rates (O40) | local employment effects (J68) |
| differential exposure to common shocks (C21) | differential changes in outcomes (I24) |