Bounds on direct and indirect effects under treatment/mediator endogeneity and outcome attrition

Martin Huber and Lukas Laffers

Econometric Reviews, 2022, vol. 41, issue 10, 1141-1163

Abstract: Causal mediation analysis aims at disentangling a treatment effect into an indirect mechanism operating through an intermediate outcome or mediator, as well as the direct effect of the treatment on the outcome of interest. However, the evaluation of direct and indirect effects is frequently complicated by non-ignorable selection into the treatment and/or mediator, even after controlling for observables, as well as sample selection/outcome attrition. We propose a method for bounding direct and indirect effects in the presence of such complications using a method that is based on a sequence of linear programming problems. Considering inverse probability weighting by propensity scores, we compute the weights that would yield identification in the absence of complications and perturb them by an entropy parameter reflecting a specific amount of propensity score misspecification to set-identify the effects of interest. We apply our method to data from the National Longitudinal Survey of Youth 1979 to derive bounds on the explained and unexplained components of a gender wage gap decomposition that is likely prone to non-ignorable mediator selection and outcome attrition.

Date: 2022
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Related works:
Working Paper: Bounds on direct and indirect effects under treatment/mediator endogeneity and outcome attrition (2020)
Working Paper: Bounds on direct and indirect effects under treatment/mediator endogeneity and outcome attrition (2020)
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DOI: 10.1080/07474938.2022.2127077

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