The Augmented Synthetic Control Method

The synthetic control method (SCM) is a popular approach for estimating the impact of a treatment on a single unit in panel data settings. The "synthetic control" is a weighted average of control units that balances the treated unit's pre-treatment outcomes as closely as possible. A critical feature of the original proposal is to use SCM only when the fit on pre-treatment outcomes is excellent. We propose Augmented SCM as an extension of SCM to settings where such pre-treatment fit is infeasible. Analogous to bias correction for inexact matching, Augmented SCM uses an outcome model to estimate the bias due to imperfect pre-treatment fit and then de-biases the original SCM estimate. Our main proposal, which uses ridge regression as the outcome model, directly controls pre-treatment fit while minimizing extrapolation from the convex hull. This estimator can also be expressed as a solution to a modified synthetic controls problem that allows negative weights on some donor units. We bound the estimation error of this approach under different data generating processes, including a linear factor model, and show how regularization helps to avoid over-fitting to noise. We demonstrate gains from Augmented SCM with extensive simulation studies and apply this framework to estimate the impact of the 2012 Kansas tax cuts on economic growth. We implement the proposed method in the new augsynth R package

Growth, Income Distribution, And well-Being In Transition Countries

In this paper we use several well-being measures that combine average income with a measure of inequality to undertake international and intertemporal well-being comparisons in transition countries. Our well-being measures drastically change the impression of levels and changes in well-being from a traditional reliance on income measures. They also significantly affect the ranking of countries, when compared to rankings based on real incomes. Due to low inequality and moderate income levels, socialist countries enjoyed relatively high levels of economic well-being. In the transition process, rising inequality and falling incomes have led to a dramatic decline in well-being in many transition countries, and a corresponding worsening in rank when compared to other countries. There is great variance in the income and inequality performance of transition countries. We find a close correlation between income losses and inequality increases suggesting the ability of appropriate policies to reduce the income losses and reduce rising inequality. While the political dimension of transformation remains largely successful, our indicators suggest that most transition countries have yet to reach the level of economic well-being enjoyed in the late 1980s

IMPACT ASSESSMENT OF THE 2003 CAP REFORM AND THE NITRATE DIRECTIVE ON THE ARABLE FARMING SYSTEM IN THE MIDI-PYRÉNÉES REGION: BIO-ECONOMIC MODELING AT FIELD, FARM AND REGIONAL LEVELS

This paper analyses the impact of the 2003 CAP reform (the so-called Fischler Reform) and its interaction with the Nitrate Directive on the sustainability of selected arable farming systems in a French region (Midi-Pyrénées). The Nitrate Directive is one of the oldest EU environmental programs designed to reduce water pollution by nitrate from agricultural sources, through a set of measures, defined at regional level, and mandatory for farmers of vulnerable zones. This impact analysis is performed through a bio-economic modelling framework coupling the crop model CropSyst and the farm-based model FSSIM developed, within the EU FP6 SEAMLESS project (Van Ittersum et al., 2008). The 2003 CAP reform was compared first to the continuation of Agenda 2000 Regulations and then to a policy scenario combining the CAP reform with the application of the Nitrate Directive. Compared to the continuation of Agenda 2000 Regulations, the implementation of the 2003 CAP reform leads to (i) a decrease of durum wheat area, as the supplement for durum wheat in traditional production zones was reduced and integrated in the single payment scheme, (ii) a slight increase in the land used for irrigated crops, especially for maize grain, considering that 25% of the payments for these crops remain coupled and (iii) an amelioration of farm income due to a better crop allocation. Regarding the environmental results, the 2003 CAP reform induces a decrease of nitrate leaching mostly because of the drop in the level of durum wheat growing under cereal rotations in profit of soft wheat-sunflower rotation which generates less pollution levels. The impact analysis of the policy scenario shows that the potential 3% premium cut is not enough to compel farmers to adopt the Nitrate Directive and to substitute entirely the current activities by the alternative ones based on better N management. The farm income is marginally affected in spite of this premium cut thanks to the implementation of certain alternative activities which are more competitive. The impact on nitrate leaching is not always positive and swings between -6% to +5% depending on farm types. This implies that the partial adoption of better N management is not sufficient to ensure a reduction of leached nitrate. A sensitivity analysis shows that 17% of premium cut is required to enforce all arable farmers in the region to implement this directive.Integrated assessment, Agricultural Policy, Nitrate Directive, Bioeconomic modelling, multi-scale analysis., Agricultural and Food Policy, Environmental Economics and Policy, Research Methods/ Statistical Methods, Q18, Q52, Q58,

Growth, Income Distribution, And well-Being In Transition Countries

In this paper we use several well-being measures that combine average income with a measure of inequality to undertake international and intertemporal well-being comparisons in transition countries. Our well-being measures drastically change the impression of levels and changes in well-being from a traditional reliance on income measures. They also significantly affect the ranking of countries, when compared to rankings based on real incomes. Due to low inequality and moderate income levels, socialist countries enjoyed relatively high levels of economic well-being. In the transition process, rising inequality and falling incomes have led to a dramatic decline in well-being in many transition countries, and a corresponding worsening in rank when compared to other countries. There is great variance in the income and inequality performance of transition countries. We find a close correlation between income losses and inequality increases suggesting the ability of appropriate policies to reduce the income losses and reduce rising inequality. While the political dimension of transformation remains largely successful, our indicators suggest that most transition countries have yet to reach the level of economic well-being enjoyed in the late 1980s.

The impact of the judicial objective function on the enforcement of environmental standards.

We investigate the influence of a judge’s objective function on the type of sanctions used for enforcing environmental standards. We focus on the difference between monetary and non-monetary penalties. Therefore, we examine the extent to which judges take social costs of sanctions into account when making judgments in court in the context of environmental violations. Furthermore, we conduct an empirical analysis to test the main findings of the theoretical model using court data from several Belgian jurisdictions. We find that besides minimizing environmental damages judges also take social costs of sanctions into account in their decision-making.

Dynamic Factor Analysis for Measuring Money

Technological innovations in the financial industry pose major problems for the measurement of monetary aggregates. The authors describe work on a new measure of money that has a more satisfactory means of identifying and removing the effects of financial innovations. The new method distinguishes between the measured data (currency and deposit balances) and the underlying phenomena of interest (the intended use of money for transactions and savings). Although the classification scheme used for monetary aggregates was originally designed to provide a proxy for the phenomena of interest, it is breaking down. The authors feel it is beneficial to move to an explicit attempt to measure an index of intended use. The distinction is only a preliminary step. It provides a mechanism that allows for financial innovations to affect measured data without fundamentally altering the underlying phenomena being measured, but it does not automatically accommodate financial innovations. To achieve that step will require further work. At least intuitively, however, the focus on an explicit measurement model provides a better framework for identifying when financial innovations change the measured data. Although the work is preliminary, and there are many outstanding problems, if the approach proves successful it will result in the most fundamental reformulation in the way money is measured since the introduction of monetary aggregates half a century ago. The authors review previous methodologies and describe a dynamic factor approach that makes an explicit distinction between the measured data and the underlying phenomena. They present some preliminary estimates using simulated and real data.Econometric and statistical methods; Monetary aggregates; Monetary and financial indicators

The impact of judicial objective function on the enforcement of environmental standards.

We investigate the influence of a judge’s objective function on the type of sanctions used for enforcing environmental standards. We focus on the difference between monetary and non-monetary penalties. Therefore, we examine the extent to which judges take social costs of sanctions into account when making judgments in court in the context of environmental violations. Furthermore, we conduct an empirical analysis to test the main findings of the theoretical model using court data from several Belgian jurisdictions. We find that besides minimizing environmental damages judges also take social costs of sanctions into account in their decisionmaking. The first part of this paper uses quantitative methods to assess the success of party affiliation, personal interests and the economic profile of the constituencies in predicting voting behavior. Thanks to the detailed censuses of 1846 on agriculture, industry and population, it is possible to typify the economic make-up of the electoral districts in much more detail than in the British case. However, the analysis of roll-call voting proves that party affiliation and personal and constituency economic interests are insufficient to explain the shift towards free trade. The second part of the paper then discusses the role played by political strategy and ideas in the liberalization of corn tariffs, using a qualitative analysis of the debates on tariff policy. The large number of votes over a forty year period allows us to document the relationship between ideas and interests in a new way.Environmental policy; monitoring and enforcement; non-monetary sanctions