Omitted Variable Bias: The Simple Case - Hedibert
It is easy to see that Bias( ~ 1) = 0 when 1 2 = 0 The omitted variable x 2 is not in the \true" model. 2 ~ = 0 Recall that ~ is the slope from the simple regression x i2 on x i1 i= 1;:::;n; which is directly related to the correlation between x
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