A2 The Consequences Of Including An Irrelevant Variable The Unbiasedness Property

and we know that it is unbiased. For the model (13.3.7), we obtain

(!>x2)(E xD — (E yx3)(E x2x3) <0 2 = -2- (2)

Now the true model in deviation form is yi = ¡2 X2 + (Ui — u) (3)

Substituting for yi from (3) into (2) and simplifying, we obtain

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