Shift-Share Instruments and the Impact of Immigration

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 "shiftshare" 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 countryof-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.

The Impact of Immigration on the Labor Market

“…This result is consistent with Jaeger et al . (), who exploit nonexperimental United States data to investigate the wage impact of immigration, and find that local‐level wages tend to return to their pre‐shock level after a decade. The recovery of local wages is consistent with economic theory, which predicts that immigration triggers various adjustments within and across localities that contribute to the recovery of local average wages.…”

Happily Ever after: Immigration, Natives’ Marriage, and Fertility

“…An appealing feature of our setting is that both WWI and the Immigration Acts created a clear break not only in the number but also, and crucially, in the countries of origin of immigrants over time. As a result, the potential threat highlighted by Jaeger et al (2018) is substantially less severe in this historical context than in the contemporaneous period.…”

“…Finally, the recent work by Jaeger et al (2018) shows that classic shift-share instruments may suffer from serial correlation in immigration flows from the same sending countries to the same set of receiving areas. An appealing feature of our setting is that both WWI and the Immigration Acts created a clear break not only in the number but also, and crucially, in the countries of origin of immigrants over time.…”

Gifts of the Immigrants, Woes of the Natives: Lessons from the Age of Mass Migration

“…An additional advantage of exploiting WWI and the Immigration Acts is that these shocks lowered substantially the serial correlation in migration ‡ows to US cities over time. This is desirable since, as noted by Jaeger et al (2018), one potential threat to shift-share instruments for the contemporaneous period is precisely the high persistence of migration ‡ows.…”

“…30 In online appendix A, I estimate a speci…cation similar to the "double-instrumentation" strategy proposed by Jaeger et al (2018), instrumenting the contemporaneous stock of immigrants with predicted lagged in ‡ows. Results are unchanged (Table A20).…”