When Can We Determine the Direction of Omitted Variable Bias of OLS Estimators?

Authors

Deepankar Basu, Department of Economics, University of Massachusetts, AmherstFollow

Working Paper Number

2018-16

Publication Date

2018

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.

DOI

https://doi.org/10.7275/13243837

License

UMass Amherst Open Access Policy

Recommended Citation

Basu, Deepankar, "When Can We Determine the Direction of Omitted Variable Bias of OLS Estimators?" (2018). UMass Amherst Economics Working Papers. 253.
https://doi.org/10.7275/13243837