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Bartik Instruments: What, When, Why, and How

Paul Goldsmith-Pinkham, Isaac Sorkin, Henry Swift

NBER Working Paper No. 24408
Issued in March 2018, Revised in November 2019
NBER Program(s):Corporate Finance, Children, Economic Fluctuations and Growth, International Trade and Investment, Labor Studies

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.

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Document Object Identifier (DOI): 10.3386/w24408

Published: Paul Goldsmith-Pinkham & Isaac Sorkin & Henry Swift, 2020. "Bartik Instruments: What, When, Why, and How," American Economic Review, vol 110(8), pages 2586-2624. citation courtesy of

 
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