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Title: Shift-Share Instruments and Dynamic Adjustments: The Case of Immigration

Citation Type: Conference Paper

Publication Year: 2018

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Abstract: A prominent class of instruments combines local shares with aggregate shifts. We demonstrate that estimates using these “shift-share” instruments are inherently vulnerable to bias from dynamic adjustments to past shocks. To illustrate, we show that estimates of the partial equilibrium impact of immigration on wages employing a frequently-used shift-share instrument are unlikely to identify a causal effect. We propose a dynamic variant of the shift-share estimator that yields consistent and substantially more negative estimates than those using the conventional instrument. Our results are a cautionary tale for a large body of empirical work relying on shiftshare instruments for causal inference.

Url: http://www.economics.jku.at/members/Department/files/ResearchSeminar/SS18/Jaeger.pdf

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Authors: Jaeger, David, A; Ruist, Joakim; Stuhler, Jan

Conference Name: Fall 2018 Seminar in Applied Economics

Publisher Location: City University of New York

Data Collections: IPUMS USA

Topics: Methodology and Data Collection, Migration and Immigration, Other

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