Econometrica: Nov, 2023, Volume 91, Issue 6
Nonrandom Exposure to Exogenous Shocks
Kirill Borusyak, Peter Hull
We develop a new approach to 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 or transportation networks and simulated instruments for policy eligibility. 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 nonrandomness in shock exposure: the average treatment (or instrument) across shock counterfactuals. We use this approach to address bias when estimating employment effects of market access growth from Chinese high‐speed rail construction.
Supplement to "Non-Random Exposure to Exogenous Shocks"
Kirill Borusyak and Peter Hull
The replication package for this paper is available at https://doi.org/10.5281/zenodo.8286785. The Journal checked the data and codes included in the package for their ability to reproduce the results in the paper and approved online appendices.
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