2. Omitted variable bias: a. What is omitted variable bias? b. What are the two necessary conditions for an omitted variable Z to result in omitted variable bias? c. Suppose we regress an outcome variable Y on an independent variable X, but we omit controlling for variable Z. How will the coefficient estimate for X be biased in the following cases? i. Z is negatively correlated with both X and Y ii. Z is positively correlated with both X and Y iii. Z positively correlated with X but negatively correlated with Y iv. Z negatively correlated with X but positively correlated with Y v. Z is not correlated with either X or Y vi. Z is positively correlated with X but not correlated with Y
2. Omitted variable bias: a. What is omitted variable bias? b. What are the two necessary conditions for an omitted variable Z to result in omitted variable bias? c. Suppose we regress an outcome variable Y on an independent variable X, but we omit controlling for variable Z. How will the coefficient estimate for X be biased in the following cases? i. Z is negatively correlated with both X and Y ii. Z is positively correlated with both X and Y iii. Z positively correlated with X but negatively correlated with Y iv. Z negatively correlated with X but positively correlated with Y v. Z is not correlated with either X or Y vi. Z is positively correlated with X but not correlated with Y
Chapter2: Mathematics For Microeconomics
Section: Chapter Questions
Problem 2.15P
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Transcribed Image Text:2. Omitted variable bias:
a. What is omitted variable bias?
b. What are the two necessary conditions for an omitted variable Z to result in
omitted variable bias?
c. Suppose we regress an outcome variable Y on an independent variable X, but we
omit controlling for variable Z. How will the coefficient estimate for X be biased
in the following cases?
i. Z is negatively correlated with both X and Y
ii. Z is positively correlated with both X and Y
iii. Z positively correlated with X but negatively correlated with Y
iv. Z negatively correlated with X but positively correlated with Y
v. Z is not correlated with either X or Y
vi. Z is positively correlated with X but not correlated with Y
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