Pinotti (2015):
(a) Describe the synthetic control group method and its primary assumption for validity.
• The synthetic control group method is a technique used in causal inference, particularly to evaluate the effects of an intervention or treatment when a randomized experiment is not feasible. This method constructs a "synthetic" version of a treatment group by creating a weighted combination of control units (i.e., other regions or groups that did not receive the treatment) that best match the treatment group in terms of pre-treatment characteristics.
• The primary assumption for this method to be valid is that the synthetic control replicates the counterfactual outcome—that is, the outcome that would have occurred in the absence of the treatment. This assumes that any difference between the treatment group and the synthetic control after the intervention can be attributed to the treatment effect alone.
(b) Why does the author consider the effect of organized crime in Apulia and Basilicata rather than regions where organized crime is more widespread?
• Pinotti likely focuses on Apulia and Basilicata to avoid selection bias and endogeneity issues that arise when studying regions where organized crime is more prevalent (such as Sicily or Calabria). In areas where organized crime is widespread, it is challenging to isolate the economic impact because organized crime is deeply entrenched in both the social and economic structures.
• By choosing Apulia and Basilicata—where organized crime was less established at the onset—Pinotti could more clearly identify and attribute economic impacts to the emergence of organized crime, providing a cleaner comparison and more reliable estimates.
(c) What is the primary purpose of including Figure VI in the paper? What subset of years is most important to inspect and why?
• Purpose of Figure VI: Figure VI seems to illustrate a comparison of GDP per capita over time between a region impacted by organized crime ("Actual with Mafia") and its synthetic control ("Synthetic Control"). This figure likely helps demonstrate the economic divergence following the introduction of organized crime.
• Subset of Years: The years just after the matching period (1965 to around 1985) are crucial because this is when the effect of organized crime on economic outcomes could start manifesting. By inspecting this period, the reader can assess whether organized crime led to a sustained negative impact on economic growth.
(d) What is Figure X testing? Describe the test and how it is conducted.
• Figure X appears to show placebo tests for two outcomes: GDP per capita and murder rates. In this context, placebo tests involve applying the synthetic control method to regions not affected by the Mafia outbreak to check if similar results appear in regions without organized crime.
• This test assesses robustness and specificity. If similar trends were observed in the placebo regions, it would suggest that the observed impact in the treated region might be due to other factors, not the Mafia's influence. However, if the treated region stands out relative to the placebo, it strengthens the argument that organized crime had a unique causal effect.
This breakdown should clarify the purpose and methodology behind Pinotti's study as discussed in this exam question set. Let me know if you need further details on any point!
(a) Describe the synthetic control group method and its primary assumption for validity.
• The synthetic control group method is a technique used in causal inference, particularly to evaluate the effects of an intervention or treatment when a randomized experiment is not feasible. This method constructs a "synthetic" version of a treatment group by creating a weighted combination of control units (i.e., other regions or groups that did not receive the treatment) that best match the treatment group in terms of pre-treatment characteristics.
• The primary assumption for this method to be valid is that the synthetic control replicates the counterfactual outcome—that is, the outcome that would have occurred in the absence of the treatment. This assumes that any difference between the treatment group and the synthetic control after the intervention can be attributed to the treatment effect alone.
(b) Why does the author consider the effect of organized crime in Apulia and Basilicata rather than regions where organized crime is more widespread?
• Pinotti likely focuses on Apulia and Basilicata to avoid selection bias and endogeneity issues that arise when studying regions where organized crime is more prevalent (such as Sicily or Calabria). In areas where organized crime is widespread, it is challenging to isolate the economic impact because organized crime is deeply entrenched in both the social and economic structures.
• By choosing Apulia and Basilicata—where organized crime was less established at the onset—Pinotti could more clearly identify and attribute economic impacts to the emergence of organized crime, providing a cleaner comparison and more reliable estimates.
(c) What is the primary purpose of including Figure VI in the paper? What subset of years is most important to inspect and why?
• Purpose of Figure VI: Figure VI seems to illustrate a comparison of GDP per capita over time between a region impacted by organized crime ("Actual with Mafia") and its synthetic control ("Synthetic Control"). This figure likely helps demonstrate the economic divergence following the introduction of organized crime.
• Subset of Years: The years just after the matching period (1965 to around 1985) are crucial because this is when the effect of organized crime on economic outcomes could start manifesting. By inspecting this period, the reader can assess whether organized crime led to a sustained negative impact on economic growth.
(d) What is Figure X testing? Describe the test and how it is conducted.
• Figure X appears to show placebo tests for two outcomes: GDP per capita and murder rates. In this context, placebo tests involve applying the synthetic control method to regions not affected by the Mafia outbreak to check if similar results appear in regions without organized crime.
• This test assesses robustness and specificity. If similar trends were observed in the placebo regions, it would suggest that the observed impact in the treated region might be due to other factors, not the Mafia's influence. However, if the treated region stands out relative to the placebo, it strengthens the argument that organized crime had a unique causal effect.
This breakdown should clarify the purpose and methodology behind Pinotti's study as discussed in this exam question set. Let me know if you need further details on any point!
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