Regional Policy Evaluation:Interactive Fixed Effects and Synthetic Controls

Gobillon, Laurent and Magnac, Thierry (2013) Regional Policy Evaluation:Interactive Fixed Effects and Synthetic Controls. TSE Working Paper, n. 13-419

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In this paper, we investigate the use of interactive effect or linear factor models in regional
policy evaluation. We contrast treatment effect estimates obtained by Bai (2009)'s least
squares method with the popular difference in difference estimates as well as with estimates
obtained using synthetic control approaches as developed by Abadie and coauthors. We show
that difference in differences are generically biased and we derive the support conditions that
are required for the application of synthetic controls. We construct an extensive set of
Monte Carlo experiments to compare the performance of these estimation methods in small
samples. As an empirical illustration, we also apply them to the evaluation of the impact on
local unemployment of an enterprise zone policy implemented in France in the 1990s.

Item Type: Monograph (Working Paper)
Language: English
Date: July 2013
Uncontrolled Keywords: Policy evaluation, Linear factor models, Synthetic controls, Economic geography, Enterprise zones
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:37
Last Modified: 07 Mar 2018 13:22
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