A convenient omitted variable bias formula for treatment effect models
Damian Clarke ()
Economics Letters, 2019, vol. 174, issue C, 84-88
Generally, determining the size and magnitude of the omitted variable bias (OVB) in regression models is challenging when multiple included and omitted variables are present. Here, I describe a convenient OVB formula for treatment effect models with potentially many included and omitted variables. I show that in these circumstances it is simple to infer the direction, and potentially the magnitude, of the bias. In a simple setting, this OVB is based on mutually exclusive binary variables, however I provide an extension which loosens the need for mutual exclusivity of variables, deriving the bias in difference-in-differences style models with an arbitrary number of included and excluded “treatment” indicators.
Keywords: Omitted variable bias; Ordinary least squares regression; Treatment effects; Difference-in-differences (search for similar items in EconPapers)
JEL-codes: C13 C21 C22 (search for similar items in EconPapers)
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Working Paper: A Convenient Omitted Variable Bias Formula for Treatment Effect Models (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:174:y:2019:i:c:p:84-88
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