Explain the Omitted Variable Bias Problem, and Show the Equation(s)

question 9

Essay

Explain the omitted variable bias problem, and show the equation(s) for determining the size of the bias.

---

Definitions:

Payroll Tax

Financial obligations placed on employers and workers, regularly computed based on a percentage of the compensation paid to workers.

Per-hour Wage

Compensation paid to an employee based on the number of hours worked.

Payroll Tax

Dues extracted from employers or laborers, usually as a percentage of the salary expenditures.

Payroll Tax

Taxes imposed on employers and/or employees, and are usually calculated as a percentage of the salaries that employers pay their staff.