
Quantitative Economics
Journal Of The Econometric Society
Edited by: StĆ©phane Bonhomme ā¢ Print ISSN: 1759-7323 ā¢ Online ISSN: 1759-7331
Edited by: StĆ©phane Bonhomme ā¢ Print ISSN: 1759-7323 ā¢ Online ISSN: 1759-7331
August 15, 2022
Quantitative Economics: Nov, 2021, Volume 12, Issue 4
Bruno Ferman, Cristine Pinto
We analyze the properties of the Synthetic Control (SC) and related estimators when the preātreatment 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 preātreatment 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 differenceāinādifference estimator. We also derive a specification test for the demeaned SC estimator in this setting with imperfect preātreatment 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 differenceāinādifferences policy evaluation linear factor model C13 C21 C23