Assignment Problem: Suppose that you estimate support for populism (populism) using the probability that an individual's occupation is offshorable (offshore). Your original model is:
populismi = β0 + β1offshorei + ui
You are limited, however, by the availability of data and, thus, you know that your model is biased. In this sense, a more accurate model would be, for example:
populismi = β0 + β1offshorei + β2ideologyi + ui
Answer the following questions:
1. Using both models, fully develop the components of the bias that you would observed when estimating your original model. Show all your work.
2. Show the full range of values that the bias could take in your original model. Justify your answer in as much detail as possible.