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Outliers Detection Methods in Panel Data Regression: An

Application to Environment Science

Article · February 2019

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International Journal of Ecological Economics and Statistics;
Volume. 39, Issue No. 1; Year 2018; Int. J. Ecol. Econ. Stat.;
ISSN 0973-1385 (Print), ISSN 0973-7537 (Online)

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The existence of outliers in panel data may violate the assumption of classical OLS estimator. They
may lead to misestimating the relationship between variables. The main objective of this study is to
detect the outliers, leverages and the influence points by using different diagnostic methods. The
other objective is to measure the effects of outliers on OLS estimator by comparing the results of
using the sample with outliers and the samples after removing the outliers. The analyses are applied
to the environmental science data on modelling the relationship between CO2 emissions, energy
consumption and economic growth for two groups of countries, i.e. the developed versus the
developing countries. The data take the range between1960 to 2010. Our results reveal that the
Robust Mahalanobis distance method outperforms the other methods in identifying the outliers as
it uses the robust mean and robust variance estimation. Besides, the estimated model after
excluding the outliers from the analysis could provide a more accurate estimation. Comparing the
results between two groups of countries, our results show that developing countries group has lower
CO2 emissions by 0.80 unit in compare to the developed countries group.

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