Jushan Bai, Peng Wang
arXiv 29 Jun 2026 · Econometrics
arXiv:2606.29691 · PDF · DOI · OpenAlex · Extracted main text
We develop a factor-model framework for causal inference in panels with policy interventions. Treatment effects are represented as structural changes in treated units' exposure to latent common shocks and, in extensions, changes in the factor process itself. The approach does not impose the standard parallel-trends restriction, accommodates one or many treated units, and targets systematic effects when unit-time idiosyncratic effects are not point identified. We provide estimation and inference under both fixed and treatment-dependent factor processes. Simulations show coverage close to nominal levels. In applications to California tobacco control and German reunification, the method produces estimates broadly consistent with synthetic control while delivering formal confidence intervals.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Gobillon, Laurent and Thierry Magnac (2016) Regional policy evaluation: Interactive fixed effects and synthetic controls | 0.874 | 5 | 2 | 100% |
| 2 | Xu, Yiqing (2017) Generalized synthetic control method: Causal inference with interactive fixed effects models | 0.874 | 5 | 2 | 100% |
| 3 | Bai, Jushan (2009) Panel data models with interactive fixed effects self | 0.811 | 4 | 2 | 100% |
| 4 | Abadie, Alberto, Alexis Diamond, and Jens Hainmueller (2010) Synthetic control methods for comparative case studies: Estimating the effect of California's tobacco control program | 0.737 | 3 | 2 | 100% |
| 5 | Abadie, Alberto, Alexis Diamond, and Jens Hainmueller (2015) Comparative politics and the synthetic control method | 0.737 | 3 | 2 | 100% |
| 6 | Hsiao, Cheng, H. Steven Ching, and Shui Ki Wan (2012) A panel data approach for program evaluation: Measuring the benefits of political and economic integration of Hong Kong with Mai… | 0.644 | 4 | 1 | 100% |
| 7 | Ahn, Seung C. and Alex R. Horenstein (2013) Eigenvalue ratio test for the number of factors | 0.585 | 3 | 1 | 100% |
| 8 | Bai, Jushan (2003) Inferential theory for factor models of large dimensions self | 0.511 | 2 | 1 | 100% |
| 9 | Callaway, Brantly and Sonia Karami (2023) Treatment effects in interactive fixed effects models with a small number of time periods | 0.511 | 2 | 1 | 100% |
| 10 | Chernozhukov, Victor, Kaspar Wuthrich, and Yinchu Zhu (2025) Debiasing and t-tests for synthetic control inference on average causal effects. Papers 1812.10820v9, arXiv.org | 0.511 | 2 | 1 | 100% |
Showing the top 10 of 27 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | Specification testing with grouped fixed effects | 0.644 | 2 | 2 |