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An Empirical Comparison Between the Synthetic Control Method and HSIAO et al. 's Panel Data Approach to Program Evaluation
Author(s) -
Gardeazabal Javier,
VegaBayo Ainhoa
Publication year - 2017
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2557
Subject(s) - mean squared error , statistics , mean absolute error , range (aeronautics) , panel data , econometrics , mathematics , computer science , engineering , aerospace engineering
Summary We compare two program evaluation methodologies: the synthetic control method and the panel data approach. We apply both methods to estimate the effect of the political and economic integration of Hong Kong. The results obtained differ depending on the methodology used. We then conduct a simulation that shows that the synthetic control method results in a post‐treatment mean squared error, mean absolute percentage error, and mean error with a smaller interquartile range, whenever there is a good enough match. Copyright © 2016 John Wiley & Sons, Ltd.