Identify More, Observe Less: Mediation Analysis: Mediation Analysis Synthetic Control

Giovanni Mellace and Alessandra Pasquini ()
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Alessandra Pasquini: Tor Vergata University, Postal: Italy

No 12/2019, Discussion Papers on Economics from University of Southern Denmark, Department of Economics

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 (search for similar items in EconPapers)
JEL-codes: C21 C23 C31 C33 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2019-10-22
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:sdueko:2019_012

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