Omitted Variable Bias occurs when a model leaves out one or more relevant variables, leading to biased and inconsistent parameter estimates. This bias arises because the omitted variable is correlated with both the dependent variable and one or more included independent variables, distorting the true relationship being studied.

Omitted Variable Bias

relevant variables

Biased parameter estimates

inconsistent parameter estimates

Omitted Variable

A dependent variable is the outcome factor that researchers measure in an experiment or study, which is influenced by changes in the independent variable. It is crucial for determining the effect of the independent variable and understanding causal relationships in research settings.

dependent variable

Independent variables are factors or conditions that are manipulated or categorized to determine their effect on dependent variables in an experiment or study. They are essential for establishing cause-and-effect relationships and are crucial in hypothesis testing and experimental design.

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