The inclusive synthetic control method

Roberta di Stefano () and Giovanni Mellace
Additional contact information
Roberta di Stefano: Department of Methods and Models for Economics, Postal: Territory and Finance Sapienza University of Rome Via del Castro Laurenziano 9, Rome, 00161, Italy

No 14/2020, Discussion Papers on Economics from University of Southern Denmark, Department of Economics

Abstract: The Synthetic Control Method (SCM) estimates the causal effect of a policy intervention in a panel data setting with only a few treated units and control units. The treated outcome in the absence of the intervention is recovered by a weighted average of the control units. The latter cannot be affected by the intervention, neither directly nor indirectly. We introduce the inclusive synthetic control method (iSCM), a novel and intuitive synthetic control modification that allows including units potentially affected directly or indirectly by an intervention in the donor pool. Our method is well suited for applications with multiple treated units where including treated units in the donor pool substantially improves the pre-intervention fit and/or for applications where some of the units in the donor pool might be affected by spillover effects. Our iSCM is very easy to implement, and any synthetic control type estimation and inference procedure can be used. Finally, as an illustrative empirical example, we re-estimate the causal effect of German reunification on GDP per capita allowing for spillover effects from West Germany to Austria.

Keywords: Synthetic Control Method; spillover effects; causal inference (search for similar items in EconPapers)
JEL-codes: C21 C23 C31 C33 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2020-11-25
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.sdu.dk/-/media/files/om_sdu/institutte ... 2020/dpbe14_2020.pdf Full text (application/pdf)

Related works:
Working Paper: The inclusive Synthetic Control Method (2024)
Working Paper: The inclusive synthetic control method (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:sdueko:2020_014

Access Statistics for this paper

More papers in Discussion Papers on Economics from University of Southern Denmark, Department of Economics Department of Economics, University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Astrid Holm Nielsen ().