Moretti replication published in AER

Summary

I’m pleased to announce that my replication of Moretti (2021) (M21) is now accepted as a comment at American Economic Review. Here is the pdf. I find ten issues in the paper. My comment focuses on two major problems; in the appendix, I document eight (relatively) minor problems.M21 studies agglomeration effects for innovation: do bigger technology clusters have more patenting? The main results are based on inventor-level regressions of patents on cluster size, which give a positive correlation. To claim a causal effect, M21 uses an event study and IV strategy to rule out selection and omitted variable bias.To test for selection bias, M21 uses an event study based on inventors moving across cities. Since moving changes cluster size, we should see a clear effect on patenting; if inventors select into bigger cities, we’ll see a trend before the move. I show that the original event study uses an incorrect model: it doesn’t actually use variation from moving. When I run a proper mover event study, I get a null result.The original (incorrect) event study shows a big effect only in t=0. Using a proper event study shows no effect.M21 uses an instrumental variable to address omitted variable bias, such as local subsidies that drive both cluster size and patenting. The instrument is based on the number of inventors in the same field who work for firms in other cities. Due to a coding error, the data is not sorted by city, so the instrument is constructed incorrectly. I correct the code and find a null result.The calculates a first-difference by firm; it sorts by field (zd), firm (org_new) and year, but not by city (bea). DD1 is then a first-difference across cities.The event study and IV are necessary to establish that the baseline regressions show causation, nor correlation. Since they both fail, the main takeaway of my comment is that the positive correlation between cluster size and patenting may not be causal.I was hired by Coefficient Giving to do a small extension of th...