Unobserved Variables

All non-trivial variables relevant to the DGP should be included—even if we cannot measure them.

Unobserved variable

  • Relevant to the DGP
  • Researcher doesn’t have access
Terry’s Unobservable Mood
Terry’s Unobservable Mood
Typst Code 
= Figure 6.3: Terry's Unobservable Mood
#diagram(bezier: true,
  node(<Cake>, fill: blue.lighten(50%)),
  node(<CoinFlip>, fill: blue.lighten(50%)),
  node(<Money>, fill: blue.lighten(50%)),
  node(<TerryInRoom>, fill: blue.lighten(50%)),
  node(<TerrysMood>, fill: gray.lighten(75%)),

  edge(<CoinFlip>, <Cake>),
  edge(<CoinFlip>, <Money>),
  edge(<TerryInRoom>, <Money>),
  edge(<TerrysMood>, <TerryInRoom>, 
    //fill: gray.lighten(50%),
    stroke: gray.lighten(50%))
)