[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/bfi/wpaper/2020-130.html
   My bibliography  Save this paper

Non-Random Exposure to Exogenous Shocks: Theory and Applications

Author

Listed:
  • Kirill Borusyak

    (University College London - Department of Economics)

  • Peter Hull

    (University of Chicago - Becker Friedman Institute for Economics)

Abstract
We develop new tools for estimating the causal effects of treatments or instruments that combine multiple sources of variation according to a known formula. Examples include treatments capturing spillovers in social and transportation networks, simulated instruments for policy eligibility, and shift-share instruments. We show how exogenous shocks to some, but not all, determinants of such variables can be leveraged while avoiding omitted variables bias. Our solution involves specifying counterfactual shocks that may as well have been realized and adjusting for a summary measure of non-randomness in shock exposure: the average treatment (or instrument) across such counterfactuals. We further show how to use shock counterfactuals for valid finite-sample inference, and characterize the valid instruments that are asymptotically efficient. We apply this framework to address bias when estimating employment effects of market access growth from Chinese high-speed rail construction, and to boost power when estimating coverage effects of expanded Medicaid eligibility.

Suggested Citation

  • Kirill Borusyak & Peter Hull, 2020. "Non-Random Exposure to Exogenous Shocks: Theory and Applications," Working Papers 2020-130, Becker Friedman Institute for Research In Economics.
    • Handle: RePEc:bfi:wpaper:2020-130
    as

    Download full text from publisher

    File URL: https://repec.bfi.uchicago.edu/RePEc/pdfs/BFI_WP_2020130.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stefano Della Vigna & Ruben Enikolopov & Vera Mironova & Maria Petrova & Ekaterina Zhuravskaya, 2014. "Cross-Border Media and Nationalism: Evidence from Serbian Radio in Croatia," American Economic Journal: Applied Economics, American Economic Association, vol. 6(3), pages 103-132, July.
    2. Janet Currie & Jonathan Gruber, 1996. "Health Insurance Eligibility, Utilization of Medical Care, and Child Health," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(2), pages 431-466.
    3. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    4. Atı̇la Abdulkadı̇roğlu & Joshua D. Angrist & Yusuke Narita & Parag Pathak, 2022. "Breaking Ties: Regression Discontinuity Design Meets Market Design," Econometrica, Econometric Society, vol. 90(1), pages 117-151, January.
    5. Vasco M Carvalho & Makoto Nirei & Yukiko U Saito & Alireza Tahbaz-Salehi, 0. "Supply Chain Disruptions: Evidence from the Great East Japan Earthquake," The Quarterly Journal of Economics, Oxford University Press, vol. 136(2), pages 1255-1321.
    6. Volpe Martincus, Christian & Blyde, Juan, 2013. "Shaky roads and trembling exports: Assessing the trade effects of domestic infrastructure using a natural experiment," Journal of International Economics, Elsevier, vol. 90(1), pages 148-161.
    7. Benjamin A. Olken, 2009. "Do Television and Radio Destroy Social Capital? Evidence from Indonesian Villages," American Economic Journal: Applied Economics, American Economic Association, vol. 1(4), pages 1-33, October.
    8. Daron Acemoglu & Pablo D. Azar, 2020. "Endogenous Production Networks," Econometrica, Econometric Society, vol. 88(1), pages 33-82, January.
    9. Machin, Stephen & Costa, Rui & Dhingra, Swati, 2019. "Trade and Worker Deskilling," CEPR Discussion Papers 13768, C.E.P.R. Discussion Papers.
    10. Keisuke Hirano & Guido W. Imbens & Geert Ridder, 2003. "Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score," Econometrica, Econometric Society, vol. 71(4), pages 1161-1189, July.
    11. Michael Greenstone & Alexandre Mas & Hoai-Luu Nguyen, 2020. "Do Credit Market Shocks Affect the Real Economy? Quasi-experimental Evidence from the Great Recession and "Normal" Economic Times," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 200-225, February.
    12. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, December.
    13. Chandra, Amitabh & Thompson, Eric, 2000. "Does public infrastructure affect economic activity?: Evidence from the rural interstate highway system," Regional Science and Urban Economics, Elsevier, vol. 30(4), pages 457-490, July.
    14. Guy Michaels, 2008. "The Effect of Trade on the Demand for Skill: Evidence from the Interstate Highway System," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 683-701, November.
    15. Gabriel M Ahlfeldt & Arne Feddersen, 2018. "From periphery to core: measuring agglomeration effects using high-speed rail," Journal of Economic Geography, Oxford University Press, vol. 18(2), pages 355-390.
    16. Cooperman, Alicia Dailey, 2017. "Randomization Inference with Rainfall Data: Using Historical Weather Patterns for Variance Estimation," Political Analysis, Cambridge University Press, vol. 25(3), pages 277-288, July.
    17. Brian K. Kovak, 2013. "Regional Effects of Trade Reform: What Is the Correct Measure of Liberalization?," American Economic Review, American Economic Association, vol. 103(5), pages 1960-1976, August.
    18. East, Chloe N. & Kuka, Elira, 2015. "Reexamining the consumption smoothing benefits of Unemployment Insurance," Journal of Public Economics, Elsevier, vol. 132(C), pages 32-50.
    19. Rodrigo Adão & Costas Arkolakis & Federico Esposito, 2019. "General Equilibrium Effects in Space: Theory and Measurement," NBER Working Papers 25544, National Bureau of Economic Research, Inc.
    20. Basso, Gaetano & Peri, Giovanni, 2015. "The Association between Immigration and Labor Market Outcomes in the United States," IZA Discussion Papers 9436, Institute of Labor Economics (IZA).
    21. Chamberlain, Gary, 1987. "Asymptotic efficiency in estimation with conditional moment restrictions," Journal of Econometrics, Elsevier, vol. 34(3), pages 305-334, March.
    22. Guido W. Imbens & Paul R. Rosenbaum, 2005. "Robust, accurate confidence intervals with a weak instrument: quarter of birth and education," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(1), pages 109-126, January.
    23. Edward Miguel & Michael Kremer, 2004. "Worms: Identifying Impacts on Education and Health in the Presence of Treatment Externalities," Econometrica, Econometric Society, vol. 72(1), pages 159-217, January.
    24. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 775-805.
    25. Joshua D. Angrist & Kathryn Graddy & Guido W. Imbens, 2000. "The Interpretation of Instrumental Variables Estimators in Simultaneous Equations Models with an Application to the Demand for Fish," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 499-527.
    26. Berger, Thor & Enflo, Kerstin, 2017. "Locomotives of local growth: The short- and long-term impact of railroads in Sweden," Journal of Urban Economics, Elsevier, vol. 98(C), pages 124-138.
    27. Leah Boustan & Fernando Ferreira & Hernan Winkler & Eric M. Zolt, 2013. "The Effect of Rising Income Inequality on Taxation and Public Expenditures: Evidence from U.S. Municipalities and School Districts, 1970–2000," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1291-1302, October.
    28. Angrist, Joshua D. & Pathak, Parag A. & Zarate, Roman A., 2023. "Choice and consequence: Assessing mismatch at Chicago exam schools," Journal of Public Economics, Elsevier, vol. 223(C).
    29. repec:hal:pseose:halshs-01053370 is not listed on IDEAS
    30. Cullen, Julie Berry & Gruber, Jonathan, 2000. "Does Unemployment Insurance Crowd Out Spousal Labor Supply?," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 546-572, July.
    31. Lin, Yatang, 2017. "Travel costs and urban specialization patterns: Evidence from China’s high speed railway system," Journal of Urban Economics, Elsevier, vol. 98(C), pages 98-123.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kirill Borusyak & Peter Hull & Xavier Jaravel, 2023. "Design-Based Identification with Formula Instruments: A Review," NBER Working Papers 31393, National Bureau of Economic Research, Inc.
    2. Okamoto, Chigusa & Sato, Yasuhiro, 2021. "Impacts of high-speed rail construction on land prices in urban agglomerations: Evidence from Kyushu in Japan," Journal of Asian Economics, Elsevier, vol. 76(C).
    3. Baek, Jisun & Park, WooRam, 2022. "The impact of improved passenger transport system on manufacturing plant productivity," Regional Science and Urban Economics, Elsevier, vol. 96(C).
    4. Kirill Borusyak & Peter Hull & Xavier Jaravel, 2022. "Quasi-Experimental Shift-Share Research Designs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(1), pages 181-213.
    5. Redding, Stephen, 2020. "Trade and Geography," CEPR Discussion Papers 15268, C.E.P.R. Discussion Papers.
    6. Peter Hull & Michal Kolesár & Christopher Walters, 2022. "Labor by design: contributions of David Card, Joshua Angrist, and Guido Imbens," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(3), pages 603-645, July.
    7. Stephan Fretz & Raphaël Parchet & Frédéric Robert-Nicoud, 2022. "Highways, Market Access and Spatial Sorting," The Economic Journal, Royal Economic Society, vol. 132(643), pages 1011-1036.
    8. Luisa Dörr & Stefanie Gäbler, 2020. "Does Highway Accessibility Influence Local Tax Factors? Evidence from German Municipalities," ifo Working Paper Series 321, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    9. Baum-Snow, Nathaniel & Ferreira, Fernando, 2015. "Causal Inference in Urban and Regional Economics," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 3-68, Elsevier.
    10. David B Audretsch & Dirk Christian Dohse & João Pereira dos Santos, 0. "The effects of highway tolls on private business activity—results from a natural experiment," Journal of Economic Geography, Oxford University Press, vol. 20(6), pages 1331-1357.
    11. Das, Abhiman & Ghani, Ejaz & Grover, Arti & Kerr, William & Nanda, Ramana, 2024. "JUE insight: Infrastructure and Finance: Evidence from India’s GQ highway network," Journal of Urban Economics, Elsevier, vol. 142(C).
    12. Paul Goldsmith-Pinkham & Isaac Sorkin & Henry Swift, 2020. "Bartik Instruments: What, When, Why, and How," American Economic Review, American Economic Association, vol. 110(8), pages 2586-2624, August.
    13. Yang, Xiaolan & Wang, Rui & Guo, Dongmei & Sun, Weizeng, 2020. "The reconfiguration effect of China's high-speed railway on intercity connection ——A study based on media attention index," Transport Policy, Elsevier, vol. 95(C), pages 47-56.
    14. Garcia-López, Miquel-Àngel & Herranz-Loncán, Alfonso & Tassinari, Filippo & Viladecans-Marsal, Elisabet, 2023. "Paving the way to modern growth: The Spanish Bourbon roads," Explorations in Economic History, Elsevier, vol. 90(C).
    15. Alfaro, Laura & García-Santana, Manuel & Moral-Benito, Enrique, 2021. "On the direct and indirect real effects of credit supply shocks," Journal of Financial Economics, Elsevier, vol. 139(3), pages 895-921.
    16. Gilles Duranton & Matthew A. Turner, 2011. "The Fundamental Law of Road Congestion: Evidence from US Cities," American Economic Review, American Economic Association, vol. 101(6), pages 2616-2652, October.
    17. Hayakawa, Kazunobu & Keola, Souknilanh & Sudsawasd, Sasatra & Yamanouchi, Kenta, 2022. "Impacts of an international bridge on households: Evidence from Thailand," Journal of Asian Economics, Elsevier, vol. 83(C).
    18. Dong, Xiaofang, 2018. "High-speed railway and urban sectoral employment in China," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 603-621.
    19. Rodrigo Adão & Costas Arkolakis & Federico Esposito, 2019. "General Equilibrium Effects in Space: Theory and Measurement," NBER Working Papers 25544, National Bureau of Economic Research, Inc.
    20. Brooks, Leah & Gendron-Carrier, Nicolas & Rua, Gisela, 2021. "The local impact of containerization," Journal of Urban Economics, Elsevier, vol. 126(C).

    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfi:wpaper:2020-130. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Toni Shears (email available below). General contact details of provider: https://edirc.repec.org/data/mfichus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.