The Input-Output Approach to Instrument Selection
John Shea ()
Journal of Business & Economic Statistics, 1993, vol. 11, issue 2, 145-55
This article proposes a new method of selecting demand-shift instruments for disaggregated industries. The author us es prior information from input-output tables to identify industries whose output fluctuations are likely to function as approximately exogenous shocks for other industries. After motivating this idea theoretically, he implements the input-output approach using data from the 1977 detailed input-output study. The author conducts a systematic instrument search for over 450 U.S. manufacturing industr ies and finds over 200 industries possessing plausible instruments. He concludes with a brief application, showing how input-output instruments can be used to estimate the short-run supply curve of th e cement industry.
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:11:y:1993:i:2:p:145-55
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