Professional Documents
Culture Documents
Introduction
Path Analysis is a way to decompose
correlations between different variables, in
this case Human Capital vs Homeownership
rate.
Human Capital is % of population over 25
with a college degree.
Intermediary
variables
Housing
affordability
Human
Capital
Dependent
variable
+
-
Demographic
(youth)
Home
ownership
Unemployment
The Path Analysis Diagram defines our hypothesis. Human Capital has an impact on:
Home Affordability (-) as highly educated wage earners bid up prices of homes,
Demographic/youth (-) more youth fewer older people with degrees, and
Unemployment (-) as Human Capital lowers unemployment.
Human
Capital
-0.176
-0.181
Housing
affordability
0.573
-0.064
Youth
-0.249
-0.250
Unemploy.
0.064
Home
ownership
Human
Capital
-0.181
Housing
affordability
0.581
-0.064
Youth
-0.228
-0.250
Unemploy.
-0.181
Home
ownership
Given that the variables are standardized, all bivariate correlations already
represent Path coefficients (in white). Well calculate the Path coefficients in
yellow with a regression model.
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.633
R Square
0.401
Adjusted R Square
0.375
Standard Error
0.785
Observations
111
t Stat
-1.665
7.334
-2.976
-2.227
P-value
0.099
0.000
0.004
0.028
Human
Capital
-0.176
-0.181
Housing
affordability
0.573
-0.064
Youth
-0.249
-0.250
Unemploy.
0.064
Home
ownership
Path Coefficients
-0.130
Human
Capital
-0.181
Housing
affordability
0.581
-0.064
Youth
-0.228
-0.250
Unemploy.
-0.181
Home
ownership
Correlations reflect the relationship between just two variables. The Path
coefficients reflect the effect one variable has on another when controlled
for the other three variables. Now the Path coefficient of Unemployment
rate is negative.
Direct Effect
Indirect Effect
Causal Effect
Human Capital
Direct and Indirect Effects
Path Coefficients
-0.130
Human
Capital
-0.181
Housing
affordability
0.581
-0.064
Youth
-0.228
-0.250
Unemploy.
-0.181
Home
ownership
A
-0.181
-0.064
-0.250
B
0.581
-0.228
-0.181
AxB
-0.105
0.015
0.045
-0.045
-0.130
-0.045
-0.130
-0.176
10
Reconstructing correlations
Path Coefficients
-0.130
Human
Capital
-0.181
Housing
affordability
0.581
-0.064
Youth
-0.228
-0.250
Unemploy.
Reconstructing the other correlations vs Homeownership
Home
ownership
-0.181
Housing affordability
-- Homeownership
-- Human capital -- Homeownership
-- Human capital -- Youth -- Homeownership
-- Human capital -- Unemploy.-- Homeownership
A
0.581
-0.181
-0.181
-0.181
Youth
-- Homeownership
-- Human capital -- Homeownership
-- Human capital -- Housing afford. -- Homeownership
-- Human capital -- Unemployment -- Homeownership
-0.228
-0.064
-0.064
-0.064
Unemployment
-- Homeownership
-- Human capital -- Homeownership
-- Human capital -- Housing afford. -- Homeownership
-- Human capital -- Youth -- Homeownership
-0.181
-0.250
-0.250
-0.250
-0.130
-0.064
-0.250
-0.228
-0.181
-0.130
-0.181
-0.250
-0.130
-0.181
-0.064
0.581
-0.181
0.581
-0.228
AxBxC
0.581
0.024
-0.003
-0.008
0.593
-0.228
0.008
0.007
-0.003
-0.216
-0.181
0.033
0.026
-0.004
-0.126
11
Actual R
-0.176
0.573
-0.249
0.064
Predicted R
-0.176
0.593
-0.216
-0.126
Error
0.000
-0.020
-0.033
0.190
RMSE
Error2
0.0000
0.0004
0.0011
0.0361
0.0969
12
13