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Cherry Picking with Synthetic Controls

Ferman, Bruno and Pinto, Cristine and Possebom, Vitor (2017): Cherry Picking with Synthetic Controls.

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Abstract

We show that a lack of guidance on how to choose the matching variables used in the Synthetic Control (SC) estimator creates specification-searching opportunities in SC applications. This undermines one of the potential advantages of the method, which is providing a transparent way of choosing comparison units and, therefore, being less susceptible to specification searching than alternative methods. To address this problem, we provide recommendations to limit the possibilities for specification searching in the SC method. Finally, we analyze the possibilities for specification searching and our recommendations in two empirical applications.

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