Synthetic Controls with spillover effects: A comparative study (2405.01645v1)

Abstract: Iterative Synthetic Control Method is introduced in this study, a modification of the Synthetic Control Method (SCM) designed to improve its predictive performance by utilizing control units affected by the treatment in question. This method is then compared to other SCM modifications: SCM without any modifications, SCM after removing all spillover-affected units, Inclusive SCM, and the SP SCM model. For the comparison, Monte Carlo simulations are utilized, generating artificial datasets with known counterfactuals and comparing the predictive performance of the methods. Generally, the Inclusive SCM performed best in all settings and is relatively simple to implement. The Iterative SCM, introduced in this paper, was in close seconds, with a small difference in performance and a simpler implementation.