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 d...

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Bibliographic Details
Published in:The American economic review 2021-12, Vol.111 (12), p.4088-4118
Main Authors: Arkhangelsky, Dmitry, Athey, Susan, Hirshberg, David A., Imbens, Guido W., Wager, Stefan
Format: Article
Language:English
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Summary: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.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.20190159