Endogenous Confounding in Causal Decomposition Analysis

Should a set of hypothetical interventions eliminate the Black-White gap in malleable factors such as schooling, how much racial disparity in subsequent youth development would be reduced and how much would remain? To address this question, a causal decomposition analysis must credibly identify the causal impact of intervening on the malleable factors. However, major confounders such as parental SES are intermediate outcomes of systemic racism experienced over generations that place Black households and communities at a great disadvantage. For this reason, an intervention that attempts to eliminate the Black-White gap in schooling within levels of parental SES or other endogenous confounders has two major problems: (1) Such an attempt is infeasible when only one but not both racial groups are present within some extreme levels of parental SES. (2) Even if both groups are present within every level of parental SES, the attempt would nonetheless fail to eliminate the marginal Black-White gap in schooling due to the endogeneity of parental SES. We propose a novel solution that replaces the original scale of an endogenous confounder with a scale preserving one’s within-group relative standing. A semiparametric weighting strategy then emulates the counterfactual outcome of an equity-oriented intervention. Our analysis of the NLSY 1997 data reveals real-world implications of the methodological dilemma posed by endogenous confounding.