Synthetic Control Estimator: A Tool for Comparative Case Studies in Economic History

Abstract

The Synthetic Control Method has become a widely used tool in estimating the causal impact of policies, shocks and interventions of interest on economic and social outcomes. The technique has become particularly popular in estimating the effect of these shocks on a single treated unit. As a transparent and data-driven statistical technique, the goal of the Synthetic Control Method is to construct an artificial control group for the treated unit that has similar pre-treatment characteristics but has not undergone the treatment itself. The synthetic control technique works well when the control group balances pre-intervention outcomes and auxiliary covariates as much as possible. In spite of its widespread adoption, the use of the Synthetic Control Method in comparative economic history has lagged behind other areas of economics. In this article, we critically review the properties of the Synthetic Control Method and discuss the necessary conditions for a plausible application of the technique to comparative economic history in support of research designed to answer some of the long-running historical questions.