$$
Causal inference with panel data can be viewed as a tensor completion problem, where the tensors in consideration are N \times T \times D, where N, T, and D are the number of units, periods, and treatment states respectively. WLOG, we focus on the binary case.
In most observational settings, treatment is rare and absorbing, so the \mathbf{Y}^(0) matrix is dense and \mathbf{Y}^{1} matrix is sparse. So, most researchers focus on the Average Treatment effect on the Treated (ATT), which is the difference {\mathbb{E}\left[Y^{1} - Y^0 | D = 1\right]} in the post-treatment periods for the treated units. Y^1s are observed for the treatment units {i: D = 1}, so the learning problem is to impute untreated potential outcomes Y^0.
Consider a N \times T outcome matrix of untreated potential outcomes \mathbf{Y}^0. Some subset N_1 units are treated from time T0+1 onwards. We can construct a corresponding matrix \mathbf{W}, which serves as a mask for \mathbf{Y}^0: whenever W_{it} is 1, \mathbf{Y}^0 is missing, and vice versa. The goal is to impute the missing entries corresponding with ? in the matrix below.
To impute missing potential outcomes, we may leverage
Vertical Regression is particularly suitable when the data matrix is ‘fat’ (T >> N), while Horizontal Regression is particularly suitable when the data matrix is ‘thin’ (N >> T). MC is well suited for square-ish matrices.
root = "~/Desktop/0_computation_notes/metrics/00_CausalInference/Panel/"
df = fread(file.path(root, "california_prop99.csv"))
# custom function to construct wide outcome and treatment matrices from panel data
setup = panelMatrices(df, "State", "Year", "treated", "PacksPerCapita")
attach(setup)
mask = 1 - W
Yr = as.numeric(colnames(Y))
# california series
Ycal = Y %>% .[nrow(.), ]The difference in differences estimator can be thought of as a (naive) imputation estimator that constructs missing entries in \mathbf{Y}^0 as the average of nonmissing units + an intercept \mu, which is the average difference between treatment unit outcomes and control unit outcomes in the pre-treatment period. Note that this means all units get equal weight of 1/N_{co}, where N_{co} is the number of control units, and the weights aren’t data-driven.
# did
did = DID(Y, mask) %>% .[nrow(.),]Although the weights aren’t data driven, the offset \mu is learned on the basis of pre-treatment outcomes for treated and control units, so DiD may be considered a Vertical regression.
The Synthetic Control estimator imputes missing values in \mathbf{Y}^0 as a weighted average of post-treatment outcomes for control units, where the weights are learned using simplex regression of pre-treatment outcomes for the treatment unit on the pre-treatment outcomes of control units.
# synth
syn = adh_mp_rows(Y, mask) %>% .[nrow(.),]Synth is a Vertical regression.
The DIFP (Doudchenko-Imbens-Ferman-Pinto) estimator is similar to the synthetic control estimator but allows for negative weights and an intercept, and to this end uses ridge regression of pre-treatment outcomes for the treatment unit on the pre-treatment outcomes of control units to learn weights.
# enH
enH = en_mp_rows(Y, mask, num_alpha = 40) %>% .[nrow(.),]EN Synth is a Vertical regression.
The time series approach involves regressing the post-treatment outcomes for never-treated units on pre-treatment outcomes, and using these coefficients to impute the untreated potential outcome for the treatment unit.
TS Synth is a Horizontal regression.
The core idea of matrix completion in this setting is to model \mathbf{Y}^0 as
\mathbf{Y}^{0} = \mathbf{L}_{N \times T} + \boldsymbol{\varepsilon} = \mathbf{U}_{N \times R} \mathbf{V}^{\top}_{R \times T} + \boldsymbol{\varepsilon}_{N \times T}
Here, the number of factors / rank R isn’t known and must be estimated. In applied econometric practice, researchers frequently use the additive fixed effects specification Y_{it}^0 = \gamma_i + \delta_t + \varepsilon_{it}, which is an instance of matrix completion with R = 2 where \mathbf{U} = [\boldsymbol{\alpha} \; ; 1] and \mathbf{V}^{\top}= [\mathbf{1} \; ; \boldsymbol{\delta}]. This factor structure can be considered in terms of the Singular Value Decomposition (SVD). Using the SVD of the observed data matrix \mathbf{Y}, we can write
\mathbf{Y}^0 = \mathbf{U} \mathbf{\Sigma} \mathbf{V}^{\top}= \sum_{k=1}^K \sigma_k \mathbf{u}_k \mathbf{v}_k^{\top}
where K = \min(M, N) and \mathbf{\Sigma} is a diagnonal K \times K matrix with sorted entries \sigma_1 \geq \sigma_2 \dots \sigma_k \geq 0. By the Eckart-Young Theorem, a low rank appoximation is found by truncating this expansion at rank R. This problem is, however, nonconvex. We can use an alternative matrix norm, the `nuclear’ norm, which is the sum of the singular values of \mathbf{L}. Letting \mathcal{O} denote nonmissing (i,t) pairs, we can write the optimization problem as
\text{min}_{\mathbf{L}} \sum_{(i, t) \in \mathcal{O}} \left( Y_{it} - L_{it} \right )^2 + \lambda_L \lVert \mathbf{L} \rVert_{*}
where \lVert \cdot \rVert_{*} is the nuclear norm.
# mco
mco = mcnnm_cv(Y, mask) %>% predict_mc() %>% .[nrow(.),]The same approach by hand without fixed effects.
Matrix Completion is a mixed approach since it can leverage both vertical and horizontal information embedded in the low-rank approximation.
Same as above, but nonconvex problem because the matrix rank is in the optimisation problem. Might scale poorly for large datasets, but inherits all qualities.
# singular value thresholding
svtY0 = fillY0(fill.SVT, lambda = 5)Here, we find donors \mathcal{M} that match the pre-treatment outcomes for the treatment unit closely, and take the inverse-distance-weighted average to impute Y^0 in the post-period.
# KNN
knnY0 = fillY0(fill.KNNimpute, k = 5)This is a discretized version of Synth, so it is also Vertical.
predY = data.table(Yr, Ycal,
`Nuclear Norm` = nucY0,
`KNN` = knnY0,
# `Simple Mean` = simY0,
`Singular Value Thresholding` = svtY0,
`Difference in Differences` = did,
`Elastic Net H` = enH,
`Elastic Net V` = enV,
`Synth` = syn,
`MCNNM` = mco) %>%
setDT
predYlong = melt(predY, id.var = "Yr")
fig = ggplot() +
geom_line(data = df[State != "California"], aes(x = Year,
y = PacksPerCapita, group = State),
linewidth = 0.5, alpha = 0.1) +
# california
geom_line(data = predYlong[variable == "Ycal"], aes(Yr, value), colour = '#060404',
linewidth = 2) +
geom_vline(aes(xintercept = 1988.5), col = '#44203c', linetype = 'dotted') +
# imputations
geom_line(data = predYlong[variable != "Ycal"],
aes(Yr, value, colour = variable), #height = 0, width = 0.5,
linewidth = 1.5, alpha = 0.9) +
scale_colour_brewer(palette = "Paired") +
lal_plot_theme() +
ylim(c(NA, 150)) + labs(colour = "")
fig
Pre-treatment fit for DiD is bad, so it is likely over-estimated. Most other approaches produce roughly similar results.
Interactive – occasionally fails on quarto blog for some reason - see here for big friendly viz.
htmlwidgets::saveWidget(ggplotly(fig), "CAtrajectories.html")
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