This paper demonstrates that the Bartik instrument, formed by interacting local industry shares and national industry growth rates, relies on the exogeneity of industry shares. It shows that the Bartik estimator is numerically equivalent to a GMM estimator with industry shares as instruments. The authors also provide tools to analyze the variation driving Bartik estimates and discuss how to assess the plausibility of the underlying research design.

One author was supported by the National Science Foundation Graduate Research Fellowship. Part of the work was completed while another author was employed by the Federal Reserve Bank of New York. However, the authors state that the views expressed are their own and do not necessarily reflect those of their affiliated institutions.

This paper provides a valuable contribution to the literature on Bartik instruments by clarifying their identification strategy, unpacking their underlying variation, and offering tools for assessing their validity. The clear exposition and practical applications make it a useful resource for researchers using this popular identification strategy. However, it has a few limitations in the assumptions it needs.