A distributional synthetic control method for policy evaluation. (12th July 2020)

• Record Type: Journal Article
• Authors: Chen, Yi‐Ting
• Is Part Of: Journal of applied econometrics. Volume 35:Number 5(2020)
• Page Start: 505
• Page End: 525
• Publication Date: 2020-07-12
• Subjects: Econometrics -- Periodicals; 330.015195
• DOI: 10.1002/jae.2778
• Languages: English
• ISSNs: 0883-7252

Abstract

Summary: We extend the synthetic control method to evaluate the distributional effects of policy intervention in the possible presence of poor matching. The counterfactuals (or intervention effects) are identified by matching a vector of pre‐intervention quantile residuals of the treated unit and a convex combination of its potential‐control counterparts. The residuals are orthogonal to a set of observable common factors that control for the potentially poor matching. We also apply our method to a set of case studies that explore the distributional effects of state‐level minimum‐wage hikes in the USA.