Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Control

Arbeitspapier

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 differences 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 5077

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; National Government Expenditures and Welfare Programs ; Unemployment: Models, Duration, Incidence, and Job Search ; Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
• Subject: policy evaluation ; linear factor models ; synthetic controls ; economic geography ; enterprise zones

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gobillon, Laurent ; Magnac, Thierry
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/105124
• Last update: 10.03.2025, 11:45 AM CET