Mojtaba Eslami
arXiv 27 Jul 2026 · Statistics — Methodology
arXiv:2607.25074 · PDF · Extracted main text
Synthetic control (SC) matches a treated unit's pre-treatment trajectory to a weighted combination of donor units. We study Spectral SC, which instead matches the treated unit in coordinates defined by the leading temporal singular vectors of the donor panel, and a hybrid estimator that places separately tunable weight on retained and discarded directions, nesting raw-path SC and truncated Spectral SC as endpoints. We prove that the family reduces exactly to raw-path SC at full rank, that exact balance on $K$ retained dimensions with $N_0$ donors is underdetermined whenever $N_0>K+1$, with an affine solution set of dimension $N_0-K-1$, and that spectral imbalance maps to treatment-effect bias through a finite-sample best-linear-predictor decomposition. We evaluate the estimators across eleven data-generating regimes, using $400$ replications per regime and donor-only placebo validation to select regularization and the mixing weight. Truncated Spectral SC has significantly higher RMSE than tuned raw-path SC in every regime, with paired differences equal to $4$ to $11$ Monte Carlo standard errors. The hybrid estimator selects raw-path matching in most replications and is statistically indistinguishable from tuned SC in most regimes. The result is highly sensitive to preprocessing. With raw inputs, the performance gap is large; after removing unit and time fixed effects before spectral decomposition, as suggested by the assumptions behind our bound, the gap nearly disappears and placebo validation begins to favor truncation. We interpret these findings diagnostically rather than as evidence that Spectral SC should replace raw-path SC. Basis-estimation noise, balancing underdetermination, and fixed-effects contamination determine when spectral matching can help.
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| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Arkhangelsky, D., Athey, S., Hirshberg, D. A., Imbens, G. W., and Wa… (2021) Synthetic Difference-in-Differences | 0.928 | 4 | 4 | 100% |
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| 9 | Shao, L., Pohl, K. M., and Thompson, W. K (2026) A Generalized Synthetic Control Algorithm for Sparse Functional Data | 0.644 | 2 | 2 | 100% |
| 10 | Abadie, A., Diamond, A., and Hainmueller, J (2003) Economic Growth and the Basque Country: Synthetic Control Methods | 0.405 | 1 | 1 | 100% |
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