Deriving the Inconsistency Just as we could derive the omitted variable bias earlier. now we want to think about the inconsistency, or asymptotic bias, in this case True model: y=o+Bx,+B,x,+v You think y=Bo+B,x+u, so that u=B,x,+v and, plim B,=B,+,8 where=Cov(xi,x,) var(x) Economics 20- Prof anderson 7Economics 20 - Prof. Anderson 7 Deriving the Inconsistency Just as we could derive the omitted variable bias earlier, now we want to think about the inconsistency, or asymptotic bias, in this case ( ) ( ) 1 2 1 2 2 1 1 2 0 1 1 0 1 1 2 2 where , ~ and, plim You think : ,so that True model : Cov x x Var x u x v y x u y x x v = = + = + = + + = + + +  b b b b  b b b b b