Glossary

In statistics, a proxy or proxy variable is a variable that is not in itself directly relevant, but that serves in place of an unobservable or immeasurable variable. In order for a variable to be a good proxy, it must have a close correlation, not necessarily linear, with the variable of interest. This correlation might be either positive or negative. Proxy variable must relate to unobserved variable, must correlate with disturbance, and must not correlate with regressors once disturbance is controlled for.