Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/177111
Authors: 
Jaeger, David A.
Ruist, Joakim
Stuhler, Jan
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers 11307
Abstract: 
A large literature exploits geographic variation in the concentration of immigrants to identify their impact on a variety of outcomes. To address the endogeneity of immigrants' location choices, the most commonly-used instrument interacts national inflows by country of origin with immigrants' past geographic distribution. We present evidence that estimates based on this "shift-share" instrument conflate the short- and long-run responses to immigration shocks. If the spatial distribution of immigrant inflows is stable over time, the instrument is likely to be correlated with ongoing responses to previous supply shocks. Estimates based on the conventional shift-share instrument are therefore unlikely to identify the short-run causal effect. We propose a "multiple instrumentation" procedure that isolates the spatial variation arising from changes in the country-of-origin composition at the national level and permits us to estimate separately the short- and long-run effects. Our results are a cautionary tale for a large body of empirical work, not just on immigration, that rely on shift-share instruments for causal inference.
Subjects: 
shift-share instrument
immigration
spatial correlation
past settlement instrument
JEL: 
C36
J15
J21
J61
Document Type: 
Working Paper
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