Quantitative Economics

Journal Of The Econometric Society

Edited by: StĆ©phane Bonhomme ā€¢ Print ISSN: 1759-7323 ā€¢ Online ISSN: 1759-7331

Quantitative Economics: Nov, 2021, Volume 12, Issue 4

Synthetic controls with imperfect pretreatment fit

Bruno Ferman, Cristine Pinto

We analyze the properties of the Synthetic Control (SC) and related estimators when the preā€treatment fit is imperfect. In this framework, we show that these estimators are generally biased if treatment assignment is correlated with unobserved confounders, even when the number of preā€treatment periods goes to infinity. Still, we show that a demeaned version of the SC method can improve in terms of bias and variance relative to the differenceā€inā€difference estimator. We also derive a specification test for the demeaned SC estimator in this setting with imperfect preā€treatment fit. Given our theoretical results, we provide practical guidance for applied researchers on how to justify the use of such estimators in empirical applications.

Synthetic control differenceā€inā€differences policy evaluation linear factor model C13 C21 C23
Full Content