Design-based identification with formula instruments: a review
Kirill Borusyak, Peter Hull and Xavier Jaravel
Many studies in economics use instruments or treatments that combine a set of exogenous shocks with other predetermined variables via a known formula. Examples include shift-share instruments and measures of social or spatial spillovers. We review recent econometric tools for this setting, which leverage the assignment process of the exogenous shocks and the structure of the formula for identification. We compare this design-based approach with conventional estimation strategies based on conditional unconfoundedness, and contrast it with alternative strategies that leverage a model for unobservables.
1 January 2025
The Econometrics Journal 28(1) , pp.83-108, 2025
https://academic.oup.com/ectj/advance-article/doi/10.1093/ectj/utae003/7590835
This Journal article is published under the centre's Trade programme, Growth programme.