The two critical elements required to sign the bias of an omitted variable include the sign of the:
A) effect of the omitted variable on the outcome and the sign of the effect of the treatment variable on the outcome.
B) effect of the omitted variable on the outcome and the sign of the correlation between the omitted variable and the outcome.
C) effect of the omitted variable on the outcome and the sign of the correlation between the omitted variable and the treatment.
D) correlation between the omitted variable and the outcome and the sign of the correlation between the treatment variable and the outcome.

Question

Quizplus · Accepted Answer

The sign of the bias of an omitted variable in a regression analysis is determined by two factors: the effect of the omitted variable on the dependent variable (outcome) and the correlation between the omitted variable and the independent variable (treatment). If both have the same sign (both positive or both negative), the bias is positive. If they have opposite signs, the bias is negative.

The Two Critical Elements Required to Sign the Bias of an Omitted