NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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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 June 2019
NBER Program(s):The Corporate Finance Program, The Program on Children, The Economic Fluctuations and Growth Program, The International Trade and Investment Program, The Labor Studies Program

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

 
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