IDEAS home Printed from https://ideas.repec.org/a/taf/jnlbes/v40y2022i3p1362-1376.html
   My bibliography  Save this article

Standard Synthetic Control Methods: The Case of Using All Preintervention Outcomes Together With Covariates

Author

Listed:
  • Ashok Kaul
  • Stefan Klößner
  • Gregor Pfeifer
  • Manuel Schieler

Abstract

It is becoming increasingly popular in applications of standard synthetic control methods to include the entire pretreatment path of the outcome variable as economic predictors. We demonstrate both theoretically and empirically that using all outcome lags as separate predictors renders all other covariates irrelevant in such settings. This finding holds irrespective of how important these covariates are for accurately predicting posttreatment values of the outcome, threatening the estimator’s unbiasedness. We show that estimation results and corresponding policy conclusions can change considerably when the usage of outcome lags as predictors is restricted, resulting in other covariates obtaining positive weights. Monte Carlo studies examine potential bias.

Suggested Citation

  • Ashok Kaul & Stefan Klößner & Gregor Pfeifer & Manuel Schieler, 2022. "Standard Synthetic Control Methods: The Case of Using All Preintervention Outcomes Together With Covariates," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 40(3), pages 1362-1376, June.
    • Handle: RePEc:taf:jnlbes:v:40:y:2022:i:3:p:1362-1376
    DOI: 10.1080/07350015.2021.1930012
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/07350015.2021.1930012
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/07350015.2021.1930012?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Grodecka-Messi, Anna & Zhang, Xin, 2023. "Private bank money vs central bank money: A historical lesson for CBDC introduction," Journal of Economic Dynamics and Control, Elsevier, vol. 154(C).
    2. Di, Wenhua & Pattison, Nathaniel, 2023. "Industry Specialization and Small Business Lending," Journal of Banking & Finance, Elsevier, vol. 149(C).
    3. Selina Schulze Spüntrup, 2023. "Does Implementing Opt-Out Solve The Organ Shortage Problem? Evidence from a Synthetic Control Approach," ifo Working Paper Series 403, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Panel, Sophie & Pietri, Antoine, 2022. "God did not save the kings: Environmental consequences of the 1982 Falklands War," Ecological Economics, Elsevier, vol. 201(C).
    5. Tomasz Serwach, 2023. "The European Union and within‐country income inequalities. The case of the new member states," The World Economy, Wiley Blackwell, vol. 46(7), pages 1890-1939, July.
    6. Joseph Cummins & Brock Smith & Douglas L. Miller & David Eliot Simon, 2023. "Matching on Noise: Finite Sample Bias in the Synthetic Control Estimator," Working papers 2023-07, University of Connecticut, Department of Economics.
    7. Erick Lahura & Rosario Sabrera, 2023. "The effect of infrastructure investment on tourism demand: a synthetic control approach for the case of Kuelap, Peru," Empirical Economics, Springer, vol. 65(1), pages 443-478, July.
    8. Jason Lennard & Seán Kenny & Emma Horgan, 2023. "Banks and the Economy: Evidence from the Irish Bank Strike of 1966," Discussion Papers 2402, Centre for Macroeconomics (CFM).
    9. Mohammad Reza Farzanegan & Mohammad Ali Kadivar, 2023. "The effect of Islamic revolution and war on income inequality in Iran," Empirical Economics, Springer, vol. 65(2), pages 1007-1026, August.
    10. Johnson, Josiah & Smith, Rhet A., 2023. "Main street business initiatives and crime in small towns," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 91-112.
    11. Hong Zhuang & Miao Grace Wang & Imre Ersoy & Mesut Eren, 2023. "Does joining the European monetary union improve labor productivity? A synthetic control approach," Journal of Productivity Analysis, Springer, vol. 59(3), pages 287-306, June.
    12. Kramer, Niklas & Lessmann, Christian, 2023. "The Effects of Carbon Trading: Evidence from California’s ETS," MPRA Paper 116796, University Library of Munich, Germany.
    13. Kasper Vrolijk & Misato Sato, 2023. "Quasi-Experimental Evidence on Carbon Pricing," The World Bank Research Observer, World Bank, vol. 38(2), pages 213-248.
    14. Vrolijk, Kasper & Sato, Misato, 2023. "Quasi-experimental evidence on carbon pricing," LSE Research Online Documents on Economics 118404, London School of Economics and Political Science, LSE Library.
    15. John Charles Bradbury, 2022. "The impact of sports stadiums on localized commercial activity: Evidence from a Business Improvement District," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 194-217, January.
    16. Esaka, Taro & Fujii, Takao, 2022. "Quantifying the impact of the Tokyo Olympics on COVID-19 cases using synthetic control methods," Journal of the Japanese and International Economies, Elsevier, vol. 66(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jnlbes:v:40:y:2022:i:3:p:1362-1376. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/UBES20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.