Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80602
Authors: 
Gobillon, Laurent
Magnac, Thierry
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Paper 7493
Abstract: 
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.
Subjects: 
policy evaluation
linear factor models
synthetic controls
economic geography
enterprise zones
JEL: 
C21
C23
H53
J64
R11
Document Type: 
Working Paper

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