Randomization Inference Tests for Shift-Share Designs

We consider the problem of inference in shift-share research designs. The choice between existing approaches that allow for unrestricted spatial correlation involves tradeoffs, varying in terms of their validity when there are relatively few or concentrated shocks, and in terms of the assumptions on the shock assignment process and treatment effects heterogeneity. We propose alternative randomization inference methods that combine the advantages of different approaches. These methods are valid in finite samples under relatively stronger assumptions, while asymptotically valid under weaker assumptions.

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