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De Luca, G., Magnus, JanR. and Peracchi, F. (2018). BALANCED VARIABLE ADDITION IN LINEAR MODELS Journal of Economic Surveys, 32(4):1183--1200.

  • Affiliated author
  • Publication year
    2018
  • Journal
    Journal of Economic Surveys
View publication

This paper studies what happens when we move from a short regression to a long regression in a setting where both regressions are subject to misspecification. In this setup, the least-squares estimator in the long regression may have larger inconsistency than the least-squares estimator in the short regression. We provide a simple interpretation for the comparison of the inconsistencies and study under which conditions the additional regressors in the long regression represent a “balanced addition” to the short regression.