IDEAS home Printed from https://ideas.repec.org/a/bla/obuest/v82y2020i1p209-234.html
   My bibliography  Save this article

Bias of OLS Estimators due to Exclusion of Relevant Variables and Inclusion of Irrelevant Variables

Author

Listed:
  • Deepankar Basu

Abstract

In this paper, I discuss three issues related to bias of OLS estimators in a general multivariate setting. First, I discuss the bias that arises from omitting relevant variables. I offer a geometric interpretation of such bias and derive sufficient conditions in terms of sign restrictions that allows us to determine the direction of bias. Second, I show that inclusion of some omitted variables will not necessarily reduce the magnitude of bias as long as some others remain omitted. Third, I show that inclusion of irrelevant variables in a model with omitted variables can also have an impact on the bias of OLS estimators. I use a running example of a simple wage regression to illustrate my arguments.

Suggested Citation

  • Deepankar Basu, 2020. "Bias of OLS Estimators due to Exclusion of Relevant Variables and Inclusion of Irrelevant Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(1), pages 209-234, February.
  • Handle: RePEc:bla:obuest:v:82:y:2020:i:1:p:209-234
    DOI: 10.1111/obes.12322
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/obes.12322
    Download Restriction: no

    File URL: https://libkey.io/10.1111/obes.12322?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ahmed, Walid M.A., 2021. "How do Islamic equity markets respond to good and bad volatility of cryptocurrencies? The case of Bitcoin," Pacific-Basin Finance Journal, Elsevier, vol. 70(C).
    2. François Bourguignon & A. Hector Moreno M., 2020. "On synthetic income panels," Working Papers halshs-01988068, HAL.
    3. Deepankar Basu, 2023. "Formal Covariate Benchmarking to Bound Omitted Variable Bias," Papers 2306.10562, arXiv.org.
    4. Blankmeyer, Eric, 2022. "A bias test for heteroscedastic linear least squares regression," MPRA Paper 116605, University Library of Munich, Germany.
    5. Roy, Jayjit, 2021. "The effect of employment protection legislation on international trade," Economic Modelling, Elsevier, vol. 94(C), pages 221-234.
    6. Justin Callais & Andrew T. Young, 2022. "Does rigidity matter? Constitutional entrenchment and growth," European Journal of Law and Economics, Springer, vol. 53(1), pages 27-62, February.
    7. Deepankar Basu, 2022. "Bounds for Bias-Adjusted Treatment Effect in Linear Econometric Models," Papers 2203.12431, arXiv.org.
    8. Bruno Merlevede & Angelos Theodorakopoulos, 2021. "Productivity effects of internationalisation through the domestic supply chain," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(6), pages 808-832, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:obuest:v:82:y:2020:i:1:p:209-234. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.