Research Reports

Bayesian Benchmarking with Applications to Small Area Estimation

G.S. Datta, M. Ghosh, R. Steorts and J. Maples

KEY WORDS: Area-level, penalty parameter, two-stage, weighted mean, weighted variability

ABSTRACT

It is well-known that small area estimation needs explicit, or at least implicit use of models. These model-based estimates can differ widely from the direct estimates, especially for areas with very low sample sizes. While model-based small area estimates are very useful, one potential difficulty with such estimates is that when aggregated, the overall estimate for a larger geographical area may be quite different from the corresponding direct estimate, the latter being usually believed to be quite reliable. This is because the original survey was designed to achieve specified inferential accuracy at this higher level of aggregation. The problem can be more severe in the event of model failure as often there is no real check for validity of the assumed model. Moreover, an overall agreement with the direct estimates at an aggregate level may sometimes be necessary for policy reasons to convince the legislators of the utility of small area estimates. One way to avoid this problem is the so-called “benchmarking approach” which amounts to modifying these model-based estimates so that one gets the same aggregate estimate for the larger geographical area. Currently, the most popular approach is the so-called “raking” or ratio adjustment method which involves multiplying all the small area estimates by a constant data-dependent factor so that the weighted total agrees with the direct estimate. There are alternate proposals, mostly from frequentist considerations, which meet also the aforementioned benchmarking criterion. We propose in this paper a general class of constrained Bayes estimators which achieve as well the necessary benchmarking. Interestingly enough, many of the frequentist estimators, including the raked estimators, follow as special cases of our general result. In the process, some deficiencies of the raked estimators will be pointed out. Explicit Bayes estimators are derived that benchmark the weighted mean or both the weighted mean and variability. We illustrate our methodology by developing poverty rates in schoolaged children at the state level, and then benchmarking these estimates to match at the national level.

CITATION: Datta,G.S., Ghosh, M., Steorts, R., and Maples, J. (2009). Bayesian Benchmarking with Applications to Small Area Estimation. Statistical Research Division Research Report Series (Statistics #2009-01). U.S. Census Bureau. Available online at <http://www.census.gov/srd/papers/pdf/rss2009-01.pdf>.

Source: U.S. Census Bureau, Statistical Research Division

Published online: January 29, 2009
Last revised: January 22, 2009