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A mixed placebo test for synthetic control method

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  • Chen, Qiang
  • Yan, Guanpeng

Abstract

The in-space placebo test for synthetic control method uses fake treatment units for inference, while the in-time placebo test uses a fake treatment time. However, while the former produces p-values, the latter does not. We propose a mixed placebo test which combines both in-time and in-space placebo tests such that it uses a fake treatment time and fake treatment units simultaneously. An important advantage of mixed placebo test is that it formalizes the in-time placebo test by providing p-values. We demonstrate the use of mixed placebo test by revisiting the example of California’s tobacco control program (Abadie et al., 2010).

Suggested Citation

  • Chen, Qiang & Yan, Guanpeng, 2023. "A mixed placebo test for synthetic control method," Economics Letters, Elsevier, vol. 224(C).
    • Handle: RePEc:eee:ecolet:v:224:y:2023:i:c:s0165176523000290
    DOI: 10.1016/j.econlet.2023.111004
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    References listed on IDEAS

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    1. Alberto Abadie & Alexis Diamond & Jens Hainmueller, 2015. "Comparative Politics and the Synthetic Control Method," American Journal of Political Science, John Wiley & Sons, vol. 59(2), pages 495-510, February.
    2. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    3. Sebastian Galiani & Brian Quistorff, 2017. "The synth runner package: Utilities to automate synthetic control estimation using synth," Stata Journal, StataCorp LP, vol. 17(4), pages 834-849, December.
    4. Ivan A. Canay & Joseph P. Romano & Azeem M. Shaikh, 2017. "Randomization Tests Under an Approximate Symmetry Assumption," Econometrica, Econometric Society, vol. 85, pages 1013-1030, May.
    5. Ferman, Bruno & Pinto, Cristine, 2017. "Placebo Tests for Synthetic Controls," MPRA Paper 78079, University Library of Munich, Germany.
    6. Firpo Sergio & Possebom Vitor, 2018. "Synthetic Control Method: Inference, Sensitivity Analysis and Confidence Sets," Journal of Causal Inference, De Gruyter, vol. 6(2), pages 1-26, September.
    7. Alberto Abadie, 2021. "Using Synthetic Controls: Feasibility, Data Requirements, and Methodological Aspects," Journal of Economic Literature, American Economic Association, vol. 59(2), pages 391-425, June.
    8. Jinyong Hahn & Ruoyao Shi, 2017. "Synthetic Control and Inference," Econometrics, MDPI, vol. 5(4), pages 1-12, November.
    9. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
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