The Decomposition of Effects in Path Analysis

TLDR

The paper investigates the logic of interpreting recursive causal theories in sociology. The authors propose a systematic OLS‑based method that decomposes effects into direct and indirect components by sequentially estimating reduced‑form equations from exogenous variables to the outcome. The method yields complete information for decomposing effects, offers a simpler alternative to structural coefficient calculations, and can be summarized in tables, as demonstrated with an empirical example.

Abstract

This paper is about the logic of interpreting recursive causal theories in sociology. We review the distinction between associations and effects and discuss the decomposition of effects into direct and indirect components. We then describe a general method for decomposing effects into their components by the systematic application of ordinary least squares regression. The method involves successive computation of reduced-form equations, beginning with an equation containing only exogenous variables, then computing equations which add intervening variables in sequence from cause to effect. This generates all the information required to decompose effects into their various direct and indirect parts. This method is a substitute for the often more cumbersome computation of indirect effects from the structural coefficients (direct effects) of the causal model Finally, we present a way of summarizing this information in tabular form and illustrate the procedures using an empirical example.