The Perilous Use of Proxy Variables

Abstract

It is often not stated or quantified how well measured proxy variables account for the variance in latent constructs they are intended to represent. A sensitivity analysis was run using data from the Survey of Health, Ageing and Retirement in Europe to estimate models varying in the degree to which proxy variables represent intended constructs. Results showed that parameter estimates differ substantially across different levels of variable representation. When variables are used with poor construct validity, an insufficient amount of variance is removed from the observed spurious relationship between design variable and outcome. The findings from this methodological demonstration underscore the importance of selecting proxy variables that accurately represent the underlying construct for which control is intended.