Notes
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A proxy variable is a measurable variable that isn't directly relevant but is used in place of another unobservable or immeasurable variable.
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Proxy variables interact with other proxy variables.
- It's dangerous focusing only on one proxy variable.
- To work with multiple proxy variables, you must express them in the same unit of measure.
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A good proxy variable must have a closer correlation with the variable of interest.
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Examples:
- Proxy variable per-capita GDP measures standard of living or quality of life.
- Changes in height over a fixed time are a proxy for hormone levels in the blood.
- Slack can be used to represent an economic impact on a project.
Questions
- What are other types of proxy variables?