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Prediction Intervals for Synthetic Control Methods.

ABSTRACT: Uncertainty quantification is a fundamental problem in the analysis and interpretation of synthetic control (SC) methods. We develop conditional prediction intervals in the SC framework, and provide conditions under which these intervals offer finite-sample probability guarantees. Our method allows for covariate adjustment and non-stationary data. The construction begins by noting that the statistical uncertainty of the SC prediction is governed by two distinct sources of randomness: one coming from the construction of the (likely misspecified) SC weights in the pre-treatment period, and the other coming from the unobservable stochastic error in the post-treatment period when the treatment effect is analyzed. Accordingly, our proposed prediction intervals are constructed taking into account both sources of randomness. For implementation, we propose a simulation-based approach along with finite-sample-based probability bound arguments, naturally leading to principled sensitivity analysis methods. We illustrate the numerical performance of our methods using empirical applications and a small simulation study. Python, R and Stata software packages implementing our methodology are available.

SUBMITTER: Cattaneo MD

PROVIDER: S-EPMC9231822 | biostudies-literature |

REPOSITORIES: biostudies-literature

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