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Ordinary Least Squares

Ordinary least squares (OLS) is perhaps the most commonly used estimation technique in econometrics, and it forms the backbone of most empirical work in the economics of education. It is used to estimate a relationship, causal or otherwise, between a dependent (or outcome) variable and one or more independent (or explanatory) variables. There are many reasons why the OLS estimator is preferred: It is easy to calculate, easy to interpret, and has nice properties given some fairly weak assumptions. This entry provides a brief overview of each of these aspects of the OLS estimator.

The Mechanics of OLS

The purpose of most empirical work is to estimate a causal relationship between an explanatory and a dependent variable—that is, the effect of the explanatory variable on the dependent ...

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