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Computing Synthetic Controls Using Bilevel Optimization

Author

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  • Malo, Pekka
  • Eskelinen, Juha
  • Zhou, Xun
  • Kuosmanen, Timo

Abstract

The synthetic control method (SCM) is a major innovation in the estimation of causal effects of policy interventions and programs in a comparative case study setting. In this paper, we demonstrate that the data-driven approach to SCM requires solving a bilevel optimization problem. We show how the SCM problem can be solved using iterative algorithms based on Tykhonov descent or KKT approximations.

Suggested Citation

  • Malo, Pekka & Eskelinen, Juha & Zhou, Xun & Kuosmanen, Timo, 2020. "Computing Synthetic Controls Using Bilevel Optimization," MPRA Paper 104085, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:104085
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    File URL: https://mpra.ub.uni-muenchen.de/104085/1/MPRA_paper_104085.pdf
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    References listed on IDEAS

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    Cited by:

    1. Kuosmanen, Timo & Zhou, Xun & Eskelinen, Juha & Malo, Pekka, 2021. "Design Flaw of the Synthetic Control Method," MPRA Paper 106328, University Library of Munich, Germany.
    2. Lucke, Bernd, 2022. "Growth Effects of European Monetary Union: A Synthetic Control Approach," MPRA Paper 120662, University Library of Munich, Germany, revised 27 Mar 2024.
    3. Jaume Vives-i-Bastida, 2022. "Predictor Selection for Synthetic Controls," Papers 2203.11576, arXiv.org, revised Dec 2022.
    4. Lucke, Bernd, 2022. "Growth Effects of European Monetary Union: A Synthetic Control Approach," MPRA Paper 115373, University Library of Munich, Germany.
    5. Lucke, Bernd & Rehfeldt, Erik, 2022. "How does expropriation affect FDI? A synthetic control analysis of oil and gas sector nationalizations in South America," MPRA Paper 115374, University Library of Munich, Germany.

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    More about this item

    Keywords

    Causal effects; Comparative case studies; Policy impact assessment;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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