A Python package for implementing the Synthetic Control Method for comparative case studies.
The Synthetic Control Method has been used in studies estimating effect of an intervention when a singly unit is exposed to it. Jens Hainmueller, the maintainer of Synth’s R package, here describes the method as a “procedure to construct synthetic control units based on a convex combination of comparison units that approximates the characteristics of the unit that is exposed to the intervention.”
Before continuing, I'd like to thank Alexis Diamond for the amazing feedback. I'd also like to stress that I am basing my algorithms on the calculations seen in the papers mentioned in the references below. The works of Abadie, Diamond and Hainmueler, thus, were crucial for me to develop this implementation.
Furthermore, I stress that this is a simplification of Hainmueller's implementations of Synth in R and MATLAB. I go over how I simplified the algorithms in the section named "Current limitations and future versions".
This version of Synth takes as inputs two matrices: outcomes_matrix and predictors_matrix. The former matrix is exactly on what a researcher would like to measure effect. Conversely, the latter matrix is comprised of data that can effectively predict the outcomes for a unit.
To illustrate this, allow me to cite Abadie, Diamond, and Hainmueller (2010), who estimate the effects of California’s Proposition 99 (tobacco control program) in the per capita consumption of cigarettes. In this study, the outcomes_matrix would have data on the per capita consumption of cigarettes for unit and every year. If the study looks at t time periods, a treated unit, and j control units, the outcomes_matrix would have shape (t, j+ 1). Meanwhile, predictors_matrix is comprised of variables that can predict a unit’s outcomes. For example, the authors of the paper included Log(GDP per capita), retail price of cigarettes, and consumption of beer, among others. If the study looks at k predictors, the predictors_matrix would have shape (k, j+1).
The Synthetic Control Method uses both matrices to find 1) how important each predictor is in determining the outcome, and 2) how to construct a synthetic unit that best represents the treated one in terms of control units. For representing the importance of each predictor, Synth constructs a diagonal matrix V of length k by k, in which the term V.item(i,i) is the importance of the ith predictor for i in [0, 1, ..., k - 1]. For representing the weight of each control unit in the construction of the optimal synthetic one, Synth creates a vector W of length j, in which W[i] is the weight of the ith control unit for i in [0, 1, ..., j - 1].
To find the two unknowns, matrix V and vector W.
W is the set of weights that minimizes (X0 W - X1)'V(X0 W - X1), in which X0 is the matrix of predictors for control units, X1is the vector of predictors for the treated unit, and V is the matrix with the importance of each predictor. As one can see, W is a function of V: different matrices V yield different optimal weights. On the other hand, V minimizes (Z0 W(V) - Z1)'(Z0 W(V) - Z1), in which Z0 is the matrix of outcomes for control units, Z1is the matrix of outcomes for the treated unit, and W(V) is the optimal combination of weights given the matrix V.
In this implementation, Synth uses a nested optimization with SciPy quadratic programming minimization functions optimize.minimize and optimize.fmin_slsqp. To achieve this, I call my function get_v_1, which finds the variable v that minimizes the function get_v_0, which in turn calls the function get_w and returns the residual sum of squares associated with given values of v and w. This last function, get_w, finds the variable w that minimizes the rss associated with v and any values of w.
def get_w(w, v, x0, x1):
result = fmin_slsqp(w_rss, w, f_eqcons=w_constraint, bounds=[(0.0, 1.0)]*len(w),
args=(v, x0, x1), disp=False, full_output=True)
weights = result[0]
return weights
def get_v_0(v, w, x0, x1, z0, z1):
weights = fmin_slsqp(w_rss, w, f_eqcons=w_constraint, bounds=[(0.0, 1.0)]*len(w),
args=(v, x0, x1), disp=False, full_output=True)[0]
rss = v_rss(weights, z0, z1)
return rss
def get_v_1(v, w, x0, x1, z0, z1):
result = minimize(get_v_0, v, args=(w, x0, x1, z0, z1), bounds=[(0.0, 1.0)]*len(v))
importance = result.x
return importanceUpon finding the optimal vector W (and, by definition, V as well), Synth multiplies the Z0 (outcomes of the control units) by W to find an estimate (or a counterfactual) of the Z1 vector. Synth can plot both the estimate Z1 and the actual Z1, so the researcher can compare how well the model represents the actual data.
The breakthrough here is that Synth often returns an extremely well-fitted model of the actual data during the periods for which it optimizes. Imagine this scenario: you want to study the effects of an event that happened in 1999 by plotting the outcomes of the synthetic controls against the actual outcomes between 1990 and 2010. It only makes sense to optimize Synth for the periods [1990:1998]. This way, you will see how much the actual data will deviate from the synthetic once, which was calibrated with outcomes and predictors before the event.
output = synth_tables( predictors_matrix, ## pandas dataframe
outcomes_matrix, ## pandas dataframe
treated_unit, ## string with the index of the treated unit
control_units, ## array with indexes all control units
predictors_optimize, ## to be clear, these are the predictors that matter,
## in case there are extra ones.
outcomes_optimize, ## these are the time periods for which you are optimizing the RSS.
## you should not include anything after the treatment to ensure validity.
years_plot ## years which you want to plot
)
output
def plot(synth_tables):
estimates, actual_values = synth_tables[0], synth_tables[1]
plt.plot(range(len(estimates)),estimates, 'r--', label="Synthetic Control")
plt.plot(range(len(estimates)),actual_values, 'b-', label="Actual Data")
plt.title("Example Synthetic Control Model")
plt.ylabel("Y axis")
plt.xlabel("X axis")
plt.legend(loc='upper left')
plt.show()
plot(output)pred = pd.DataFrame({'a':[3,1,6,1], 'b':[4,2,5,0], 'c':[5,2,3,5],
'd':[4,2,4,2], 'e': [3,4,7,2]},index=['A','B','C','D'])
outc = pd.DataFrame({'a':[11,10,12,13,13,12,13], 'b':[8,8,10,11,11,11,12],
'c':[20,21,25,27,27,28,29], 'd':[16,17,22,25,25,26,27],
'e':[14,14,17,20,21,21,23]},
index=[2010,2011,2012,2013,2014,2015,2016])
output = synth_tables( pred,
outc,
'a',
['b','c','d','e'],
['A','B','C','D','E'],
[2010,2011,2012,2013,2014],[2010,2011,2012,2013,2014,2015,2016]
)
output
>>>
Predictors Table
---
Actual Synthetic
A 3 3.728477
B 1 2.543047
C 6 5.543047
D 1 0.543047
Outcomes Table
---
Actual Synthetic
2010 11 9.629141
2011 10 9.629141
2012 12 11.900664
2013 13 13.443711
2014 13 13.715234
2015 12 13.715234
2016 13 14.986758
Predictors' Weights
---
[ 0.24979485 0.21519529 0.35312926 0.17443384]
Controls' Weights
---
[ 7.28476564e-01 2.77555756e-17 -5.55111512e-17 2.71523436e-01]pred = pd.DataFrame({'a':[4,2,5,0], 'b':[4,2,5,0], 'c':[5,2,3,5],
'd':[4,2,4,2], 'e': [3,4,7,2]},index=['A','B','C','D'])
outc = pd.DataFrame({'a':[11,10,12,13,13,12,13], 'b':[8,8,10,11,11,11,12],
'c':[20,21,25,27,27,28,29], 'd':[16,17,22,25,25,26,27],
'e':[14,14,17,20,21,21,23]},
index=[2010,2011,2012,2013,2014,2015,2016])
output = synth_tables( pred,
outc,
'a',
['b','c','d','e'],
['A','B','C','D','E'],
[2010,2011,2012,2013,2014],[2010,2011,2012,2013,2014,2015,2016]
)
output
>>>
Predictors Table
---
Actual Synthetic
A 4 4.000000e+00
B 2 2.000000e+00
C 5 5.000000e+00
D 0 6.317169e-14
Outcomes Table
---
Actual Synthetic
2010 11 8
2011 10 8
2012 12 10
2013 13 11
2014 13 11
2015 12 11
2016 13 12
Predictors' Weights
---
[ 0.25 0.25 0.25 0.25] ## THIS REPRESENTS THAT PREDICTORS ARE MEANINGLESS. This is the first
## guess passed by the algorithm.
Controls' Weights
---
[ 1.00000000e+00 1.53210777e-14 -4.66293670e-15 -2.05391260e-15]pred = pd.DataFrame({'a':[3,1,6,1], 'b':[4,2,5,0], 'c':[5,2,3,5],
'd':[4,2,4,2], 'e': [3,4,7,2]},index=['A','B','C','D'])
outc = pd.DataFrame({'a':[11,10,12,13,13,12,13], 'b':[11,10,12,13,13,12,13],
'c':[20,21,25,27,27,28,29], 'd':[16,17,22,25,25,26,27],
'e':[14,14,17,20,21,21,23]},
index=[2010,2011,2012,2013,2014,2015,2016])
output = synth_tables( pred,
outc,
'a',
['b','c','d','e'],
['A','B','C','D','E'],
[2010,2011,2012,2013,2014],[2010,2011,2012,2013,2014,2015,2016]
)
output
>>>
Predictors Table
---
Actual Synthetic
A 3 4.000000e+00
B 1 2.000000e+00
C 6 5.000000e+00
D 1 -7.667478e-15
Outcomes Table
---
Actual Synthetic
2010 11 11
2011 10 10
2012 12 12
2013 13 13
2014 13 13
2015 12 12
2016 13 13
Predictors' Weights
---
[ 0.10755938 0.49973705 0.31403663 0. ]
Controls' Weights
---
[ 1.00000000e+00 -2.24126273e-15 1.24900090e-16 1.64451786e-15]pred = pd.DataFrame({'a':[3,1,6,1], 'b':[4,2,5,0], 'c':[5,2,3,5],
'd':[4,2,4,2], 'e': [3,4,7,2]},index=['A','B','C','D'])
outc = pd.DataFrame({'a':[11,10,12,13,13,15,17], 'b':[11,10,12,13,13,12,13],
'c':[20,21,25,27,27,28,29], 'd':[16,17,22,25,25,26,27],
'e':[14,14,17,20,21,21,23]},
index=[2010,2011,2012,2013,2014,2015,2016])
output = synth_tables( pred,
outc,
'a',
['b','c','d','e'],
['A','B','C','D','E'],
[2010,2011,2012,2013,2014],[2010,2011,2012,2013,2014,2015,2016]
)
output
>>>
Predictors Table
---
Actual Synthetic
A 3 4.000000e+00
B 1 2.000000e+00
C 6 5.000000e+00
D 1 -7.667478e-15
Outcomes Table
---
Actual Synthetic
2010 11 11
2011 10 10
2012 12 12
2013 13 13
2014 13 13
2015 15 12
2016 17 13
Predictors' Weights
---
[ 0.10755938 0.49973705 0.31403663 0. ]
Controls' Weights
---
[ 1.00000000e+00 -2.24126273e-15 1.24900090e-16 1.64451786e-15]Among the limitations of this implementation of Synth are:
1) Users cannot input their own V matrices
2) Users must input panda dataframes, rather than excel or csv files
3) Users cannot input special predictors, which are a part of Synth's R and MATLAB implementations.
I will focus on improving these in future versions of this code. I 100% welcome feedback from users.
Package Synth (Hainmueller and Diamond, 2015)
The Economic Costs of Conflict: A Case Study of the Basque Country (Abadie and Gardeazabal, 2003)