Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Controls

Laurent Gobillon and Thierry Magnac

No 7493, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper, we investigate the use of interactive effect or linear factor models in regional policy evaluation. We contrast treatment effect estimates obtained by Bai (2009)'s least squares method with the popular difference in difference estimates as well as with estimates obtained using synthetic control approaches as developed by Abadie and coauthors. We show that difference in differences are generically biased and we derive the support conditions that are required for the application of synthetic controls. We construct an extensive set of Monte Carlo experiments to compare the performance of these estimation methods in small samples. As an empirical illustration, we also apply them to the evaluation of the impact on local unemployment of an enterprise zone policy implemented in France in the 1990s.

Keywords: economic geography; synthetic controls; linear factor models; policy evaluation; enterprise zones (search for similar items in EconPapers)
JEL-codes: C21 C23 H53 J64 R11 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2013-07
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published - published in: Review of Economics and Statistics, 2016, 98 (3), 535-551

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https://docs.iza.org/dp7493.pdf (application/pdf)

Related works:
Journal Article: Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Controls (2016)
Working Paper: Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Controls (2016)
Working Paper: Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Controls (2016)
Working Paper: Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Control (2014)
Working Paper: Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Controls (2014)
Working Paper: Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Controls (2013)
Working Paper: Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Controls (2013)
Working Paper: Regional Policy Evaluation:Interactive Fixed Effects and Synthetic Controls (2013)
Working Paper: Regional Policy Evaluation:Interactive Fixed Effects and Synthetic Controls (2013)
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