 Assume that the "true" model to be estimated is
but formula_5 is omitted from the regression model (perhaps because there is no way to measure it directly).Then the model that is actually estimated is
where formula_7 (thus, the formula_5 term has been absorbed into the error term).If the correlation of formula_9 and formula_10 is not 0 and formula_10 separately affects formula_12 (meaning formula_13), then formula_9 is correlated with the error term formula_15.