Synthetic Difference-in-Differences

We present a new estimator for causal effects with panel data that builds on insights behind the widely used difference-in-differences and synthetic control methods. Relative to these methods we find, both theoretically and empirically, that this “synthetic difference-in-differences” estimator has desirable robustness properties, and that it performs well in settings where the conventional estimators are commonly used in practice. We study the asymptotic behavior of the estimator when the systematic part of the outcome model includes latent unit factors interacted with latent time factors, and we present conditions for consistency and asymptotic normality. (JEL C23, H25, H71, I18, L66)

Infestations as a Natural Disaster: The Economic Impacts of the Fonterra Whey Protein Concentrate Contamination Incident

<p>This paper presents the results from an investigation into the economic implications for New Zealand of the 2013 Whey Protein Concentrate contamination incident (popularly known as the Fonterra Botulism scare). It assesses the impact of this incident to dairy exports using synthetic control methods. A synthetic counterfactual scenario where the incident did not occur is developed using weighted averages of the dairy exports of countries unaffected by the scare. The research finds that there was an initial negative shock to the exports of products that were thought to have been contaminated, but that there were no significant sustained impacts on other dairy products. The affected products make up only a small proportion of New Zealand dairy exports, with the vast majority of dairy exports being unaffected products. Infant formula exports appear to have recovered somewhat in the long run, however whey product exports remain lower than they otherwise would have been.</p>

Infestations as a Natural Disaster: The Economic Impacts of the Fonterra Whey Protein Concentrate Contamination Incident

<p>This paper presents the results from an investigation into the economic implications for New Zealand of the 2013 Whey Protein Concentrate contamination incident (popularly known as the Fonterra Botulism scare). It assesses the impact of this incident to dairy exports using synthetic control methods. A synthetic counterfactual scenario where the incident did not occur is developed using weighted averages of the dairy exports of countries unaffected by the scare. The research finds that there was an initial negative shock to the exports of products that were thought to have been contaminated, but that there were no significant sustained impacts on other dairy products. The affected products make up only a small proportion of New Zealand dairy exports, with the vast majority of dairy exports being unaffected products. Infant formula exports appear to have recovered somewhat in the long run, however whey product exports remain lower than they otherwise would have been.</p>

HOW DOES THE G20 SUMMIT AFFECT LAND MARKET? EVIDENCE FROM CHINA

We employ the difference-in-difference and synthetic control methods to investigate the capitalization effect of hosting the G20 Summit on land market, based on China’s land transaction dataset from 2011 to 2019. We find that hosting the G20 Summit has a significant positive effect on land prices in the host city, increasing land prices by over 22.6% compared to comparable cities. The impact of hosting the G20 Summit on land prices is larger in the post-G20 period than in the preparation period. Further, hosting the G20 Summit has heterogeneous and distributional effects on land prices. The capitalization effects of venue construction and transportation infrastructure upgrading on land prices are the main channels.

Decoupling synthetic control methods to ensure stability, accuracy and meaningfulness

The synthetic control method (SCM) is widely used to evaluate causal effects under quasi-experimental designs. However, SCM suffers from weaknesses that compromise its accuracy, stability and meaningfulness, due to the nested optimization problem of covariate relevance and counterfactual weights. We propose a decoupling of both problems. We evaluate the economic effect of government formation deadlock in Spain-2016 and find that SCM method overestimates the effect by 0.23 pp. Furthermore, we replicate two studies and compare results from standard and decoupled SCM. Decoupled SCM offers higher accuracy and stability, while ensuring the economic meaningfulness of covariates used in building the counterfactual.

Can Contingency Fee Reforms Improve Maternal & Infant Health? Evidence from Nevada

Contingency fee laws are intended to reduce the amount of defensive medicine practiced by physicians, but their impact on such behavior is theoretically ambiguous. While nearly half of all states have adopted some type of contingency fee laws, very little empirical evidence exists with respect to related impacts, and no rigorous studies examine their potential impacts on health. We examine the impact of a particular contingency fee reform that occurred in Nevada in 2004 using synthetic control methods. Consistent with our expectations, we find a systematic increase in the C-section rate of less-educated mothers in Nevada after implementation of the reform. However, we find no systematic effect on infant mortality, suggesting that contingency reforms contribute to an increase in defensive medicine without a corresponding improvement in health.

Using Synthetic Controls: Feasibility, Data Requirements, and Methodological Aspects

Probably because of their interpretability and transparent nature, synthetic controls have become widely applied in empirical research in economics and the social sciences. This article aims to provide practical guidance to researchers employing synthetic control methods. The article starts with an overview and an introduction to synthetic control estimation. The main sections discuss the advantages of the synthetic control framework as a research design, and describe the settings where synthetic controls provide reliable estimates and those where they may fail. The article closes with a discussion of recent extensions, related methods, and avenues for future research. (JEL B41, C32, C54, E23, F15, O47)

Unilateral climate policies can substantially reduce national carbon pollution

Following the failure of climate governance regimes that sought to impose legally binding treaty-based obligations, the Paris Agreement relies on voluntary actions by individual countries. Yet, there is no guarantee that unilateral policies will lead to a decrease in carbon emissions. Critics worry that voluntary climate measures will be weak and ineffective, and insights from political economy imply that regulatory loopholes are likely to benefit carbon-intensive sectors. Here, we empirically evaluate whether unilateral action can still reduce carbon pollution by estimating the causal effect of the UK’s 2001 Climate Change Programme (CCP) on the country’s carbon emissions. Existing efforts to evaluate the overall impact of climate policies on national carbon emissions rely on Business-As-Usual (BAU) scenarios to project what carbon emissions would have been without a climate policy. We instead use synthetic control methods to undertake an ex post national-level assessment of the UK’s CCP without relying on parametric BAU assumptions and demonstrate the potential of synthetic control methods for climate policy impact evaluation. Despite setting lax carbon targets and making substantial concessions to producers, we show that, in 2005, the UK’s CO2 emissions per capita were 9.8% lower relative to what they would have been if the CCP had not been passed. Our findings offer empirical confirmation that unilateral climate policies can still reduce carbon emissions, even in the absence of a binding global climate agreement and in the presence of regulatory capture by industry.