Development of new treatment/causal effect evaluation methodology with synthetic control group Difference In Difference where stable unit treatment value assumption (SUTVA) may not hold

Author Name KAINOU Kazunari (Fellow, RIETI)
Creation Date/NO. September 2020 20-J-035
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This paper explains the result of development of the new Treatment Effect Evaluation methodology for the case of Stable Unit Treatment Value Assumption (SUTVA) may not hold and experimental methodology are hard to apply and only limited observational data are available.

By surveillance of related preceding research, it is shown that there are roughly four assumptions for Treatment Effect Evaluation including SUTVA and confirmed that only one experimental methodology are available for SUTVA violation case with interference effects at present. This paper shows that four additional assumptions are necessary for identification of interference effects of treatment in the outcome of control group.

And under those four identification assumptions, preparing a lot of sets of three independent random numbers and estimating average coefficients by iterating regression of before after difference by difference in difference using these random number sets with same random number multiplized in their after treatment samples. It enables interference induced bias estimation and that enables to correct the bias contained in the conventional Treatment Effect estimated by difference in difference with synthetic control group methodology.

These results are verified by Monte-Carlo simulation and confirmed the estimation accuracy and precision. This paper also shows practical application procedure and relevant placebo-study procedure of the new methodology.

Lastly, this paper shows the result of road-test of the new methodology using the case of the rice wholesale price change by Japanese domestic origin and brand caused by the Great East Japan Earthquake and Fukusima Number One Plant Nuclear Accident.