Nonparametric synthetic control using the npsynth command

Abstract

In this article, I build on the work of Abadie and Gardeazabal (2003, American Economic Review 93: 113–132) and Abadie, Diamond, and Hainmueller (2010, Journal of the American Statistical Association 105: 493–505), extending the synthetic control method for program evaluation—implemented in Stata via the community-contributed command synth—to the case of a nonparametric identification of the synthetic (or counterfactual) time pattern of a treated unit (a country, a region, a city, etc.) subject to a specific intervention in a given time. After theoretical description of the model, I present npsynth, the command I developed for estimating the nonparametric synthetic control method proposed in this article. Using both simulated and real data, I set out a comparison of the performance of the parametric and nonparametric methods and widely discuss the results.