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Your Econometrics Textbook Stated That There Will Be Omitted Variable

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Essay

Your econometrics textbook stated that there will be omitted variable bias in the OLS estimator unless the included regressor, X, is uncorrelated with the omitted variable or the omitted variable is not a determinant of the dependent variable, Y. Give an intuitive explanation for these two conditions.


Definitions:

Busy Intersection

A junction where multiple roads meet, often characterized by a high volume of vehicle and pedestrian traffic, making it a key focal point for transportation flow.

Default

Failure to fulfill an obligation, especially to repay a loan on time, which can result in legal actions or loss of asset privileges.

No-action Condition

An experimental or control condition where no intervention is made, commonly used in research to measure the effect of not implementing a certain action.

Choice Architecture

The organization and presentation of choices in a way that influences the decision-making process of individuals.

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