Pub. date: 2011 | Online Pub. Date: October 04, 2011 | DOI: 10.4135/9781412994163 | Print ISBN: 9781412959636 | Online ISBN: 9781412994163| Publisher:SAGE Publications, Inc.About this encyclopedia
Diana Z. O'Brien
Traditional methods for estimating regression models can be unduly influenced by a small subset of the data. For example, using ordinary least squares (OLS) regression to model economic growth in 15 industrialized democracies, Peter Lange and Geoffrey Garrett find that the interaction between Left governments and organized labor is positively and significantly correlated with economic performance. In his analysis of the data, however, Bruce Western illustrates that these findings are largely determined by the Norwegian case. Using robust estimation techniques to account for this observation reveals much greater uncertainty about the influence of the interaction effect on economic performance. OLS estimation minimizes large residuals at the expense of degrading the fit of the remaining observations. The coefficient estimates it generates can thus be strongly influenced by even a single large residual, as was the case in the model estimated by Lange and Garret. Like OLS estimation, unusual points may also ...