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Bartik Instruments: What, When, Why, and How

Paul Goldsmith-Pinkham, Isaac Sorkin, Henry Swift

American Economic Review · 2020 · Volume 110 · Issue 8

DOI: 10.1257/aer.20181047

Abstract

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 two applications: estimating the elasticity of labor supply, and estimating the elasticity of substitution between immigrants and natives.

Keywords

Model Construction and Estimation, Empirical Studies of Trade, Economics of Minorities, Races, Indigenous Peoples, and Immigrants, Non-labor Discrimination, Time Allocation and Labor Supply, Industry Studies: Manufacturing: General, Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration, Regional Labor Markets, Population, Neighborhood Characteristics, Other Spatial Production and Pricing Analysis

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