I've been working through some econometrics worksheets recently. I came to a problem that I was hoping to get some help with. Assume we have a model,
and we know that
(1) yi = βo + β1chemi + β2disti + εi
Further, assume that we only have data to estimate the regression using the following model:
E[ εi | chemi, disti ] = 0.
(2) yi = βo + β1chemi + γi.
Then, on average, what will be the estimate of β̂1 if we exclude disti from the regression, in terms of the parameters from model (1), and why?