The Effect of Omitted Variables on the Sign of Regression Coefficients (opens in new tab)

arXiv:2208.00552v5 Announce Type: replace-cross Abstract: We show that, depending on how the impact of omitted variables is measured, it can be substantially easier for omitted variables to flip coefficient signs than to drive them to zero. This behavior occurs with "Oster's delta" (Oster 2019), a widely reported robustness measure. Consequently, any time this measure is large -- suggesting that omitted variables may be unimportant -- a much smaller value reverses the sign of the parameter of...