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Interpretation of Regressions with Multiple Proxies

Author

Listed:
  • Darren Lubotsky

    (University of Illinois at Urbana-Champaign)

  • Martin Wittenberg

    (University of Cape Town)

Abstract

Multiple proxy variables are typically available for an unobserved explanatory variable in a regression. We provide a procedure by which the coefficient of interest can be estimated from a regression in which all the proxies are included simultaneously. This estimator is superior in large samples to the common practice of creating a summary measure of the proxy variables. We examine the relationship between parents' income and children's reading test scores in the United States, and between parents' assets and children's school enrollment in India, and demonstrate that the reduction in attenuation bias from a better use of proxy variables can be significant. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Darren Lubotsky & Martin Wittenberg, 2006. "Interpretation of Regressions with Multiple Proxies," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 549-562, August.
    • Handle: RePEc:tpr:restat:v:88:y:2006:i:3:p:549-562
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    More about this item

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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