In which of the following will omitted variable bias be the most severe? Treat X2 as the omitted variable in a bivariate model of Y_i = $\beta$₀ + $\beta$₁X₁_i + $\varepsilon$_i A) X2 is weakly related to X1, but strongly related to Y. B) X2 is unrelated to X1, but strongly related to Y. C) X2 is strongly related to X1, but not related to Y. D) X2 is strongly related to X1 and strongly related to Y.

Question

Quizplus · Accepted Answer

In order for omitted variable bias to be severe, the omitted variable must be related to both the dependent variable (Y) and the included independent variable (X1). Therefore, out of the given options, choice D is the most severe because X2 is strongly related to both X1 and Y.

In Which of the Following Will Omitted Variable Bias Be β\betaβ

In Which of the Following Will Omitted Variable Bias Be $\beta$