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1 Omitted Variable Bias: Part I - University of California ...

Now, remember that ^ 1 is a random variable, so that it has an expected value: E h P^ 1 i = E 1 + P i (x i x)u i i (x i x)x i = 1 + E P i (x i x )u i P i (x i x )x i = 1 Aha! So under assumptions SLR.1-4, on average our estimates of ^ 1 will be equal to the true population parameter 1 that we were after the whole time. 2

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