Causal Mediation Analysis

Mediation asks: How does treatment affect outcome?

        A ──→ M ──→ Y
        │           ↑
        └───────────┘

• $A \to M \to Y$: Indirect effect (through mediator)
• $A \to Y$: Direct effect (not through mediator)

Example: Does education ($A$) affect income ($Y$) through cognitive skills ($M$)?

Total effect = Direct effect + Indirect effect