More on Shift-Share Instruments via Borusyak, Hull and Jaravel

It is tricky to keep up with the econometrics literature on shift-share instruments. But it's important. Here is a review paper written by Borusyak, Hull and Jaravel. 

David McKenzie highlights the following: “Identification in the general case, for arbitrary formulas and designs, follows from simple adjustments based on the expected instrument: the average value of the formula across counterfactual sets of shocks, drawn from the specified assignment process. Specifically, OVB is avoided by either adding the expected instrument as a control or by using a recentered instrument which subtracts the expected instrument from the original formula. Controlling for or recentering by the expected instrument is generally necessary for identification with formula instruments, absent auxiliary assumptions on the exogeneity of shock exposure.”