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Novel Shift-Share Instruments and Their Applications

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  • Benjamin Ferri

    (Boston College)

Abstract

Shift-Share (Bartik) instruments are among the most important tools for causal identification in economics. In this paper, I crystallize main ideas underlying Shift-Share instruments - their core structure, distinctive claim to validity as instruments, history, uses, and wealth of varieties. I argue that the essence of the Shift-Share approach is to decompose the endogenous explanatory variable into an accounting identity with multiple component parts; preserve that which is most exogenous in the accounting identity, and neutralize that which is most endogenous. Following this framework, I show clearly how several variants in the literature are related. I then develop formulas for several new variants. Particularly, I show how to develop Shift-Share instruments for distribution summaries beyond the mean - the variance, skew, absolute deviation around a central point, and Gini coefficient. As an empirical application that highlights the themes of the paper, I measure the effect of earnings inequality on rates of single parenting in the U.S., comparing results using each of various alternative instruments for the Gini coefficient.

Suggested Citation

  • Benjamin Ferri, 2022. "Novel Shift-Share Instruments and Their Applications," Boston College Working Papers in Economics 1053, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:1053
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    References listed on IDEAS

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    3. Enamorado, Ted & López-Calva, Luis F. & Rodríguez-Castelán, Carlos & Winkler, Hernán, 2016. "Income inequality and violent crime: Evidence from Mexico's drug war," Journal of Development Economics, Elsevier, vol. 120(C), pages 128-143.
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    6. Gould, Eric D. & Paserman, M. Daniele, 2003. "Waiting for Mr. Right: rising inequality and declining marriage rates," Journal of Urban Economics, Elsevier, vol. 53(2), pages 257-281, March.
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    More about this item

    Keywords

    shift-share; bartik; instrumental variables; panel data; labor demand and supply; earnings inequality; single parenting;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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