Synthetic Control Method and Event Studies

Question 1

What is the synthetic control method?

Answer 1

A method to estimate the effect in a comparative study with a single intervention intervention affecting a single subject

Question 2

Define donors and the donor pool.

Answer 2

Donors: untreated subjects
Donor Pool: the set of untreated subjects

Question 3

How do we create a synthetic control?

Answer 3

• As a weighed average of the subjects in the donor pool
• By assigning weights to each subject in the donor pool
• Making sure that the pre-intervention y and selected other variables are similar

Question 4

T/F: The weights of each assigned donor add up to one

Answer 4

True

Note: this means that some donors have a 0 weight

Question 5

What is the role of the analyst in the synthetic control method?

Answer 5

• defines the event
• Choose the outcome of interest
• Choose the donor pool
• Choose the variables that should be similar in the treated and synthetic control group

Question 6

Interpret alpha in the equation.

y = alpha + B1Di1+B2Di2+B3Di3

Answer 6

The average change in y outside the event time window

Question 7

Interpret B1 in the equation

y = alpha + B1Di1+B2Di2+B3Di3

Answer 7

B1: Is how much more y tends to change 1 time period after the intervention

Question 8

What does the sum of the coefficients do in the equation?

y = alpha + B1Di1+B2Di2+B3Di3

Answer 8

B1+B2+B3 shows how y changes, on average, within three time periods after the intervention

Question 9

Define mean reversion.

Answer 9

Assumption that a measure will tend to converge to the average over time

Question 10

What are pseudo-interventions?

Answer 10

Are event time periods, or instances between event time periods, for untreated subjects

Question 11

Define a comparative study.

Answer 11

When you’re studying one event against a counterfactual. Generally looking at trends over time for both the treatment and counterfactual group.

Question 12

Define an event study.

Answer 12

Compares events at different points in time. Generally looking at the immedate before and after of the events.

Question 13

What is the difference between natural and event time?

Answer 13

Natural time is clock time meanwhile event time is defining natural time around an event. Pre event times are represented as negative numbers while post event times are represetnted as positive numbers.