The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Path Analysis

  • İnsan Tunali
Reference work entry


Path analysis is a method for estimating and testing the internal consistency of models with a postulated causal structure. The postulated structure is displayed in the form of path diagrams, where one-way arrows link causal variables to their outcomes, and curved two-headed arrows connect related variables whose causal links are not under study. Estimation proceeds along the lines of method of moments and instrumental variables theory: the causal ordering of variables along distinct paths are exploited to express the unknown structural parameters in terms of the population moments of the observed and the unobserved variables. Estimating equations are obtained by replacing the population moments of the observed variables by their sample counterparts, which are then solved for the unknown parameters and the estimates of the moments of the unobservables (which themselves can be thought of as structural parameters).

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • İnsan Tunali
    • 1
  1. 1.