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Computing Synthetic Controls Using Bilevel Optimization
Journal article   Open access  Peer reviewed

Computing Synthetic Controls Using Bilevel Optimization

Pekka Malo, Juha Eskelinen, Xun Zhou and Timo Kuosmanen
Computational economics
25/09/2023

Abstract

Business & Economics Management Mathematics, Interdisciplinary Applications Economics Mathematics Social Sciences
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.
url
https://doi.org/10.1007/s10614-023-10471-7View
Published (Version of record)CC BY V4.0 Open

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