Mediation Analysis Synthetic Control

Abstract: The synthetic control method (SCM) allows estimating the causal effect of an intervention in settings where panel data on a small number of treated 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. Our new mediation analysis synthetic control (MASC) method requires additional assumptions that are arguably mild in many settings. We illustrate the implementation of MASC in an empirical application estimating the direct and indirect effects of an anti-smoking intervention (California's Proposition 99).