Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/202949
Authors: 
Basu, Deepankar
Year of Publication: 
2018
Series/Report no.: 
Working Paper 2018-16
Abstract: 
Omitted variable bias (OVB) of OLS estimators is a serious and ubiquitous problem in social science research. Often researchers use the direction of the bias in substantive arguments or to motivate estimation methods to deal with the bias. This paper offers a geometric interpretation of OVB that highlights the difficulty in ascertaining its sign in any realistic setting and cautions against the use of direction-of-bias arguments. This analysis has implications for comparison of OLS and IV estimators too.
Subjects: 
omitted variable bias
ordinary least squares
JEL: 
C20
Document Type: 
Working Paper

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