The phrase “Bartik (1991)” has become synonymous with the shift-share research designs employed by many economists to investigate a wide range of economic outcomes. As Baum-Snow and Ferreira (2015) describe, “one of the commonest uses of IV estimation in the urban and regional economics literature is to isolate sources of exogenous variation in local labor demand. The commonest instruments for doing so are attributed to Bartik (1991) and Blanchard and Katz (1992).”
The recent literature on the shift-share research design usually starts with Tim Bartik’s 1991 book, Who Benefits from State and Local Economic Development Policies?. Excluding citations of Roy (1951) and Jones (1971), Bartik (1991) is the oldest work cited in Adao, Kolesar, Morales (QJE 2019). The first sentence of Borusyak, Hull, and Jaravel’s abstract says “Many studies use shift-share (or “Bartik”) instruments, which average a set of shocks with exposure share weights.”
But shift-share analysis is much older. A quick search on Google Books turns up a bunch of titles from the 1970s and 1980s like “The Shift-share Technique of Economic Analysis: An Annotated Bibliography” and “Dynamic Shift‐Share Analysis“.
Why the focus on Bartik (1991)? Goldsmith-Pinkham, Sorkin, and Swift, whose paper’s title is “Bartik Instruments: What, When, Why and How”, provide some explanation:
The intellectual history of the Bartik instrument is complicated. The earliest use of a shift-share type decomposition we have found is Perloff (1957, Table 6), which shows that industrial structure predicts the level of income. Freeman (1980) is one of the earliest uses of a shift-share decomposition interpreted as an instrument: it uses the change in industry composition (rather than differential growth rates of industries) as an instrument for labor demand. What is distinctive about Bartik (1991) is that the book not only treats it as an instrument, but also, in the appendix, explicitly discusses the logic in terms of the national component of the growth rates.
I wonder what Tim Bartik would make of that last sentence. His 1991 book is freely available as a PDF from the Upjohn Institute. Here is his description of the instrumental variable in Appendix 4.2:
In this book, only one type of labor demand shifter is used to form instrumental variables2: the share effect from a shift-share analysis of each metropolitan area and year-to-year employment change.3 A shift-share analysis decomposes MSA growth into three components: a national growth component, which calculates what growth would have occurred if all industries in the MSA had grown at the all-industry national average; a share component, which calculates what extra growth would have occurred if each industry in the MSA had grown at that industry’s national average; and a shift component, which calculates the extra growth that occurs because industries grow at different rates locally than they do nationally…
The instrumental variables defined by equations (17) and (18) will differ across MSAs and time due to differences in the national economic performance during the time period of the export industries in which that MSA specializes. The national growth of an industry is a rough proxy for the change in national demand for its products. Thus, these instruments measure changes in national demand for the MSA’s export industries…
Back in Chapter 7, Bartik writes:
The Bradbury, Downs, and Small approach to measuring demand-induced growth is similar to the approach used in this book. Specifically, they used the growth in demand for each metropolitan area’s export industries to predict overall growth for the metropolitan area. That is, they used the share component of a shift-share analysis to predict overall growth.
Hence, endnote 3 of Appendix 4.2 on page 282:
This type of demand shock instrument was previously used in the Bradbury, Downs and Small (1982) book; I discovered their use of this instrument after I had already come up with my approach. Thus, I can only claim the originality of ignorance for my use of this type of instrument.
Tim once tweeted:
Researchers interested in “Bartik instrument” (which is not a name I coined!) might want to look at appendix 4.2, which explains WHY this is a good instrument for local labor demand. I sometimes sense that people cite my book’s instrument without having read this appendix.
Update (10am CT): In response to my query, Tim has posted a tweetstorm describing Bradbury, Downs, and Small (1982).