A1 Refereed original research article in a scientific journal
Computing Synthetic Controls Using Bilevel Optimization
Authors: Malo Pekka, Eskelinen Juha, Zhou Xun, Kuosmanen Timo
Publisher: Springer
Publication year: 2023
Journal: Computational Economics
Journal acronym: COMPUT ECON
Number of pages: 24
ISSN: 0927-7099
eISSN: 1572-9974
DOI: https://doi.org/10.1007/s10614-023-10471-7
Web address : https://link.springer.com/article/10.1007/s10614-023-10471-7
Self-archived copy’s web address: https://research.utu.fi/converis/portal/detail/Publication/181479863
Abstract
The synthetic control method (SCM) represents a notable innovation in estimating the causal effects of policy interventions and programs in a comparative case study setting. In this paper, we demonstrate that the data-driven approach to SCM requires solving a bilevel optimization problem. We show how the original SCM problem can be solved to the global optimum through the introduction of an iterative algorithm rooted in Tykhonov regularization or Karush-Kuhn-Tucker approximations.
The synthetic control method (SCM) represents a notable innovation in estimating the causal effects of policy interventions and programs in a comparative case study setting. In this paper, we demonstrate that the data-driven approach to SCM requires solving a bilevel optimization problem. We show how the original SCM problem can be solved to the global optimum through the introduction of an iterative algorithm rooted in Tykhonov regularization or Karush-Kuhn-Tucker approximations.
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