A Counterfactual Approach to Measuring Impact of Policy Intervention on Efficiency – Synthetic Control Method and DEA

Abstract

This paper investigates the combination of the Synthetic Control Method (SCM) and Data Envelopment Analysis (DEA) to evaluate the effect of policy intervention on the efficiency of decision-making units. Specifically, the study was conducted to assess the efficiency of Serbian banks over a period of 12 years, focusing on the influence of the acquisition of Credy Bank and answering a counterfactual question - whether the efficiency of a bank would be the same if the acquisition had not happened. The study demonstrates that SCM in combination with DEA can be an effective method for analyzing the repercussions of policy measures on decision-making unit efficiency. In other words, we suggest combining these two methods in the future to conclude whether an intervention truly impacts efficiency.

Sandro Radovanović

Assistant Professor at University of Belgrade

My research interests include machine learning, development and design of decision support systems, decision theory, and fairness and justice concepts in algorithmic decision making.