Time-Aware Synthetic Control

Saeyoung Rho, Cyrus Illick, Samhitha Narasipura, Alberto Abadie, Daniel Hsu, Vishal Misra

Keywords: Synthetic Control, Causal Inference, Time Series Panel Data

TL;DR: We suggest using state-space model for synthetic-control-type of panel data to learn temporal evolution of latent factors.

Abstract: The synthetic control (SC) framework is widely used for observational causal inference with time-series panel data. SC has been successful in diverse applications, but existing methods typically treat the ordering of pre-intervention time indices interchangeable. This invariance means they may not fully take advantage of temporal structure when strong trends are present. We propose Time-Aware Synthetic Control (TASC), which employs a state-space model with a constant trend, while preserving a low-rank structure of the signal. TASC uses the Kalman filter and Rauch–Tung–Striebel smoother: it first fits a generative time-series model with expectation–maximization and then performs counterfactual inference. As an initial demonstration, we apply the TASC to a case study on California’s healthcare policy (Proposition 99). Our method showed promising results in placebo tests, indicating its potential applicability in a broader range of healthcare contexts.

Submission Number: 27