1

PATH ANALYSIS
From Multiple Regressions

Path analysis is an extension of the linear multiple regression analysis. The output (Y) is dependent on
two or more input variables (X1, X2). The method of Path analysis is basically a hypothesis based
modeling to identify the cause and effect and to know how the variables are related directly and
indirectly.
For pictorial display, the arrows show the assumed causal relations between two quantities. A single
headed arrow (
points from cause to effect. A double headed arrow (
or a double headed curved
arrow indicates that the variables are merely correlated but we are not sure about their causal relation.
The independent variables (X1, X2) are called exogenous variables. The dependent (Y) variables are
called endogenous variables.
A path from 1 to 2 is designated by the path coefficient,
effect (2) is listed first and then the cause (1).].

[Path to 2 from 1. Note: In the suffix, the

Let us suppose, we have the variable, Y dependent on X1 and X2. If we know that X1 and X2 are also
related to each other, we can think of a model. To illustrate, we designate X1, X2 and Y as 1, 2, 3
respectively. In our model, we can think that X2 is dependent on X1 and Y is dependent on X1 and X2.
So we draw the path analysis diagram:
The path coefficients between 1
and 3 is , the path coefficient
between 1 and 2 is and
between 2 and 3 is

1
3
2

Now we see there is no path towards 1, one path from 1 to 2 and two paths towards 3 (from 1 and 2).
Now if we know the correlation coefficients between all of them ( , ,
that we prepared while doing multiple regression analysis, we can write,

) from the correlation table

(1)
(2)
(3)
Equation (1) tells us that there is a direct and only one path from 1 to 2 and so the path coefficient is the
correlation coefficient between 1 & 2.

Application of Statistics for Geography and other social sciences

by Dr. Abhijit Kar Gupta. kg.abhi@gmail.com

2
Equation (2), there are two contributions:
is the direct path from 1 to 3 plus there is one path from 2
to 3 ( ) but as 2 is correlated to , we multiply that by .
Similarly, in equation (3), the correlation between 2 & 3 has two parts: direct path (
coming from 1 and now we consider 1 is correlated to 2.

) plus the path

Now consider the following multiple regression problem:

20

15

20

13

18

14

28

16

24

20

23

25

12

15

12

260

240

245

210

230

242

295

235

287

252

270

275

We calculated,

. Here,

To find correlation coefficients between each pair of variables, we need to first calculate the variances
and covariances.

)(

)(

)(

NOTE: To remember the covariance formula, we can think of variance,

)(

), as if it is a covariance between and . Thus

following this we can write, covariance between and ,

Correlation coefficients:
Application of Statistics for Geography and other social sciences
by Dr. Abhijit Kar Gupta. kg.abhi@gmail.com

)(

).

So we can prepare a correlation Matrix:

-0.81

0.87

-0.93
1

Now if we call
and

,
.

and

as 1, 2 and 3 for our purpose, we now have

So from equations, (1), (2) and (3), we can write,

,

Note that the path analysis depends on the

choice of the model. We here analysed for a
particular model. You can have various other
models, for example, X1 can be dependent on
X2 (rather than the opposite) or there may be
no dependence at all. Calculations will be
different.

(4)
(

(5), and
(

(6)

Solving the last two equations, (5) & (6) by multiplying (5) by 0.81 and adding with (6) etc., we get
and
So, now we have determined the path coefficients and now we can analyze the direct and indirect
effects of one variable on the other. The path diagram with coefficients:

X1

So we see, there is the direct effect of X1 on Y = 0.34

0.34

-0.81

X2

The indirect effect of X1 on Y through X2 = (Effect of X1 on

(
X2)x(Effect of X2 on Y) = (
So we conclude that the indirect effect is much more than
the direct effect!

-0.66

Application of Statistics for Geography and other social sciences

by Dr. Abhijit Kar Gupta. kg.abhi@gmail.com