ILRie

Senan Hogan Hennessy Causal Mediation in Natural Experiments Abstract: Natural experiments are a cornerstone of applied economics, providing settings for estimating causal effects with a compelling argument for treatment randomisation, but give little indication of the mechanisms behind causal effects. Causal Mediation (CM) is a framework for sufficiently identifying a mechanism behind the treatment effect, decomposing it into an indirect effect channel through a mediator mechanism and a remaining direct effect. By contrast, a suggestive analysis of mechanisms gives necessary but not sufficient evidence. Conventional CM methods require that the relevant mediator mechanism is as-good-as-randomly assigned; when people choose the mediator based on costs and benefits (whether to visit a doctor, to attend university, etc.), this assumption fails and conventional CM analyses are at risk of bias. I propose an alternative strategy that delivers unbiased estimates of CM effects despite unobserved selection, using instrumental variation in mediator take-up costs. The method identifies CM effects via the marginal effect of the mediator, with parametric or semi-parametric estimation that is simple to implement in two stages. Applying these methods to the Oregon Health Insurance Experiment reveals a substantial portion of the Medicaid lottery's effect on subjective health and well-being flows through increased healthcare usage --- an effect that a conventional CM analysis would mistake. This approach gives applied researchers an alternative method to estimate CM effects when an initial treatment is quasi-randomly assigned, but a mediator mechanism is not, as is common in natural experiments.

Panelists: Samira Rafaela, Former Member of European Parliament, Visiting Scholar, Cornell Law School Chiara Cristofolini, Associate Professor of Labor Law, University of Trento, Visiting Scholar, Cornell School of Industrial and Labor Relations Sarosh Kuruvilla, Andrew J. Nathanson Family Professor in Industrial and Labor Relations, Global Labor and Work, Academic Director, Global Labor Institute Moderator: Chantal Thomas, Radice Family Professor of Law and Director, Cornell Center for Global Economic Justice Cornell Law School

Jeff Smith

Gordon Hanson