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Journal article

Design-based identification with formula instruments: A review

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.

Kirill Borusyak, Peter Hull and Xavier Jaravel

27 January 2024

The Econometrics Journal , pp.1-26, 2024

DOI: 10.1093/ectj/utae003

This work is published under POID and the CEP's Trade programmeGrowth programme.