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Design-based identification with formula instruments: A review

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  • Kirill Borusyak
  • Peter Hull
  • Xavier Jaravel

Abstract

Many studies in economics use instruments or treatments which combine a set of exogenous shocks with other predetermined variables by a known formula. Examples include shift-share instruments and measures of social or spatial spillovers. We review recent econometric tools for this setting, which leverage the assignment process of the exogenous shocks and the structure of the formula for identification. We compare this design-based approach with conventional estimation strategies based on conditional unconfoundedness, and contrast it with alternative strategies that leverage a model for unobservables.

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  • Kirill Borusyak & Peter Hull & Xavier Jaravel, 2023. "Design-based identification with formula instruments: A review," CeMMAP working papers 12/23, Institute for Fiscal Studies.
    • Handle: RePEc:azt:cemmap:12/23
    DOI: 10.47004/wp.cem.2023.1223
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    2. Yoshifumi Konishi & Akari Ono, 2024. "Do Winners Win More from Transport Megaprojects? Evidence from the Great Seto Bridges in Japan," Keio-IES Discussion Paper Series 2024-003, Institute for Economics Studies, Keio University.
    3. Ablam Estel Apeti & Kwamivi Mawuli Gomado, 2024. "International monetary fund conditionality and structural reforms: Evidence from developing countries," Post-Print hal-04723871, HAL.
    4. Kieran Marray, 2024. "Estimating Spillovers from Sampled Connections," Papers 2410.17154, arXiv.org.

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    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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