Randomization based on covariates is A)not of practical importance since individuals are hardly ever assigned in this fashion. B)dependent on the covariances of the error term (serial correlation). C)a randomization in which the probability of assignment to the treatment group depends on one of more observable variables W. D)eliminates the omitted variable bias when using the difference estimator based on Y_i = β₀ + β₁X_i + u_i, where Y is the outcome variable and X is the treatment indicator.

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Randomization based on covariates is a randomization in which the probability of assignment to the treatment group depends on one or more observable variables W. This approach is often used in practice to balance treatment groups on important covariates to improve the precision and power of estimates. Option A is incorrect because, in fact, randomization based on covariates is often used in practice. Option B is incorrect because covariate-based randomization is not dependent on the covariances of the error term. Option D is incorrect because it refers to the difference estimator, which is not directly related to randomization based on covariates.

Randomization Based on Covariates Is