The Augmented Synthetic Control Method
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Publication:5881963
DOI10.1080/01621459.2021.1929245zbMATH Open1506.62484OpenAlexW4213165416MaRDI QIDQ5881963FDOQ5881963
Authors: Eli Ben-Michael, Avi Feller, Jesse M. Rothstein 
Publication date: 14 March 2023
Published in: Journal of the American Statistical Association (Search for Journal in Brave)
Abstract: The synthetic control method (SCM) is a popular approach for estimating the impact of a treatment on a single unit in panel data settings. The "synthetic control" is a weighted average of control units that balances the treated unit's pre-treatment outcomes as closely as possible. A critical feature of the original proposal is to use SCM only when the fit on pre-treatment outcomes is excellent. We propose Augmented SCM as an extension of SCM to settings where such pre-treatment fit is infeasible. Analogous to bias correction for inexact matching, Augmented SCM uses an outcome model to estimate the bias due to imperfect pre-treatment fit and then de-biases the original SCM estimate. Our main proposal, which uses ridge regression as the outcome model, directly controls pre-treatment fit while minimizing extrapolation from the convex hull. This estimator can also be expressed as a solution to a modified synthetic controls problem that allows negative weights on some donor units. We bound the estimation error of this approach under different data generating processes, including a linear factor model, and show how regularization helps to avoid over-fitting to noise. We demonstrate gains from Augmented SCM with extensive simulation studies and apply this framework to estimate the impact of the 2012 Kansas tax cuts on economic growth. We implement the proposed method in the new augsynth R package.
Full work available at URL: https://arxiv.org/abs/1811.04170
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Applications of statistics to economics (62P20) Estimation in multivariate analysis (62H12) Causal inference from observational studies (62D20)
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Cited In (26)
- Varying impacts of letters of recommendation on college admissions
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- A Penalized Synthetic Control Estimator for Disaggregated Data
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- The how and why of Bayesian nonparametric causal inference
- Approximate balancing weights for clustered observational study designs
- Benefits and costs of matching prior to a difference in differences analysis when parallel trends does not hold
- Synthetic learner: model-free inference on treatments over time
- Synthetic Control with Time Varying Coefficients A State Space Approach with Bayesian Shrinkage
- Confidence intervals of treatment effects in panel data models with interactive fixed effects
- An alternative to synthetic control for models with many covariates under sparsity
- What's trending in difference-in-differences? A synthesis of the recent econometrics literature
- The policy is always greener: impact heterogeneity of Covid-19 vaccination lotteries in the US.
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- Assessing the causal effect of binary interventions from observational panel data with few treated units
- Treatment effects in interactive fixed effects models with a small number of time periods
- Estimating the effects of a California gun control program with multitask Gaussian processes
- Causality in econometrics: choice vs chance
- Distributional synthetic controls
- Synthetic control as online linear regression
- Same root different leaves: time series and cross-sectional methods in panel data
- On the Properties of the Synthetic Control Estimator with Many Periods and Many Controls
- Hospital quality risk standardization via approximate balancing weights
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