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More Robust Estimators for Instrumental-Variable Panel Designs, With An Application to the Effect of Imports from China on US Employment

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  • Cl'ement de Chaisemartin
  • Ziteng Lei

Abstract

We show that first-difference two-stages-least-squares regressions identify non-convex combinations of location-and-period-specific treatment effects. Thus, those regressions could be biased if effects are heterogeneous. We propose an alternative instrumental-variable correlated-random-coefficient (IV-CRC) estimator, that is more robust to heterogeneous effects. We revisit Autor et al. (2013), who use a first-difference two-stages-least-squares regression to estimate the effect of imports from China on US manufacturing employment. Their regression estimates a highly non-convex combination of effects. Our more robust IV-CRC estimator is small and insignificant. Though its confidence interval is wide, it significantly differs from the first-difference two-stages-least-squares estimator.

Suggested Citation

  • Cl'ement de Chaisemartin & Ziteng Lei, 2021. "More Robust Estimators for Instrumental-Variable Panel Designs, With An Application to the Effect of Imports from China on US Employment," Papers 2103.06437, arXiv.org, revised Sep 2023.
    • Handle: RePEc:arx:papers:2103.06437
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    References listed on IDEAS

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    2. Alvarez, Fernando & Argente, David & Jimenez, Rafael & Lippi, Francesco, 2022. "Cash: A Blessing or a curse?," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 85-128.

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