Identify More, Observe Less: Mediation Analysis Synthetic Control

53 Pages Posted: 21 Nov 2019

See all articles by Giovanni Mellace

Giovanni Mellace

University of Southern Denmark - Department of Business and Economics

Alessandra Pasquini

CEIS, University of Rome Tor Vergata

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Date Written: November 18, 2019

Abstract

The synthetic control method (SCM) allows estimation of the causal effect of an intervention in settings where panel data on just a few treated units and control units are available. We show that the existing SCM as well as its extensions can be easily modified to estimate how much of the total effect goes through observed causal channels. The additional assumptions needed are arguably very mild in many settings. Furthermore, in an illustrative empirical application we estimate the effects of adopting the euro on labor productivity in several countries and show that a reduction in the Economic Complexity Index helped to mitigate the negative short run effects of adopting the new currency in some countries and boosted the positive effects in others.

Keywords: MASC, Synthetic Control Method, Mediation Analysis, Causal Channels, Causal Mechanisms, Direct and Indirect Effects

JEL Classification: C21, C23, C31, C33

Suggested Citation

Mellace, Giovanni and Pasquini, Alessandra, Identify More, Observe Less: Mediation Analysis Synthetic Control (November 18, 2019). CEIS Working Paper No. 474. Available at SSRN: https://ssrn.com/abstract=3489346 or http://dx.doi.org/10.2139/ssrn.3489346

Giovanni Mellace

University of Southern Denmark - Department of Business and Economics ( email )

DK-5230 Odense
Denmark
+4565509294 (Phone)
65509294 (Fax)

Alessandra Pasquini (Contact Author)

CEIS, University of Rome Tor Vergata ( email )

via Columbia
Rome, Lazio 00133
Italy

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