163 Omitted variable bias path diagram

This video visually explains omitted variable bias in econometrics using path diagrams. We'll start with a basic model and introduce a third variable that affects our outcome and is correlated with our explanatory variable. By mapping these relationships, you'll understand exactly why omitting a variable introduces bias and how to determine the direction of that bias. Learn to interpret the magnitudes of key relationships to predict the extent of the bias in your estimations. Visit AxiomTutoring.com and subscribe to @AxiomTutoringCourses.