A Fay-Herriot Model with Different Random Effect Variances

Journal Article

Hobza Tomáš, Morales D., Herrador M., Esteban M.D.

serial: Communications in Statistics - Theory and Methods vol.40, 5 (2011), p. 785-797

research: CEZ:AV0Z10750506

project(s): 1M0572, GA MŠk

keywords: small area estimation, Fay-Herriot model, Linear mixed model, Labor Force Survey

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abstract (eng):

A modification of the Fay–Herriot model is introduced to treat situations where small areas are divided in two groups and domain random effects have different variances across the groups. The model is applicable to data having a large subset of domains where direct estimates of the variable of interest cannot be described in the same way as in its complementary subset of domains. This is generally the case when domains are constructed by crossing geographical characteristics with sex. Algorithms and formulas to fit the model, to calculate EBLUPs and to estimate mean squared errors are given. Monte Carlo simulation experiments are presented to illustrate the gain of precision obtained by using the proposed model and to get some practical conclusions. A motivating application to Spanish Labour Force Survey data is also given.

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