26.3 Establishing Mechanisms

Once the causal effect is established, the next step is to investigate how the effect operates.

1. Mediation Analysis
   • Test whether an intermediate variable explains the effect of the treatment.
2. Moderation Analysis
   • Estimate the model separately for different subgroups.
   • Test for three-way interactions (e.g., interaction between treatment, time, and group membership in Difference-in-Differences settings).

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