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Policy-related small-area estimation

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  • Nicholas Longford

Abstract

A method of small-area estimation with a utility function is developed. The utility characterises a policy planned to be implemented in each area, based on the area's estimate of a key quantity. It is shown by simulations that the commonly applied composite and empirical Bayes estimators are inefficient for a wide range of asymmetric utility functions. Adaptations for limited budget to implement the policy are explored. An argument is presented for a closer integration of estimation and (regional) policy making because no single small- area estimator is suitable for a wide range of purposes.

Suggested Citation

  • Nicholas Longford, 2014. "Policy-related small-area estimation," Economics Working Papers 1427, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1427
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    References listed on IDEAS

    as
    1. N. T. Longford, 1999. "Multivariate shrinkage estimation of small area means and proportions," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 162(2), pages 227-245.
    2. Peter Hall & Tapabrata Maiti, 2006. "On parametric bootstrap methods for small area prediction," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 68(2), pages 221-238, April.
    3. Garthwaite, Paul H. & Kadane, Joseph B. & O'Hagan, Anthony, 2005. "Statistical Methods for Eliciting Probability Distributions," Journal of the American Statistical Association, American Statistical Association, vol. 100, pages 680-701, June.
    4. Longford, Nicholas T., 2010. "Bayesian Decision Making About Small Binomial Rates With Uncertainty About the Prior," The American Statistician, American Statistical Association, vol. 64(2), pages 164-169.
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    Keywords

    Composition; empirical Bayes; expected loss; borrowing strength; exploiting similarity; small-area estimation; utility function.;
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