Department of Economics and Business - Universitat Pompeu Fabra

Title:: Policy-related small-area estimation
Author:: Nicholas Longford
Date:: June 2014
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.
Keywords:: Composition; empirical Bayes; expected loss; borrowing strength; exploiting similarity; small-area estimation; utility function.
JEL codes:: MSC classification: 62-C12, 62-D99, 62-07.

Download the paper in PDF format