An Empirical Examination of Shift‐Share Instruments

35 Pages Posted: 6 Oct 2020

Date Written: September 2020


Bartik's (1991, 1993) approach to identifying shocks in demand to regional economies has been used extensively for nearly 30 years. We chronicle the development of Bartik‐type shift‐share instruments and examine the empirical performance of alternative versions that use different combinations of national shift and local share variables in their construction. We offer three main findings. First, instruments constructed from shares that omit employment in nontraded sectors empirically dominate versions that include total employment. Second, industrial sectors with high average shares and low variation across areas are more likely to be nontraded and endogenous. This suggests placing large weights on nontraded sector shares worsens both relevance and potential endogeneity. Finally, we demonstrate national shifters other than employment, such as prices and wages, can be used to construct instruments with unique and relevant explanatory power.

Keywords: identification, measurement, regional dynamics, urban dynamics

Suggested Citation

Larson, William D., An Empirical Examination of Shift‐Share Instruments (September 2020). Journal of Regional Science, Vol. 60, Issue 4, pp. 677-711, 2020, Available at SSRN: or

William D. Larson (Contact Author)

Federal Housing Finance Agency ( email )

400 7th Street SW
Washington, DC 20552
United States

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