Path Analysis — An Example

This paper describes the technique of path analysis using data from Scully (1962). Path analysis is a method of decomposing covariances or correlations between two variables in a structural equation model in order to determine how much of this covariance is attributable to a theoretically specified causal effect of one variable on the other. In so far as it allows us to assess the relative importance of different explanatory variables in a more adequate manner than does regression, path analysis is a technique of wide potential applicability to economists and sociologists.