MODEL-BASED PREDICTION FOR SMALL DOMAINS USING COVARIATES: A COMPARISON OF FOUR METHODS

Abstract

We consider methods for model-based small area estimation when the number of areas with sampled data is a small fraction of the total areas for which estimates are required. Abundant auxiliary information is available from the survey for all the sampled areas. Further, through an external source, there is information for all areas. The goal is to use auxiliary variables to predict the outcome of interest for all areas. We compare areal-level random forests and LASSO approaches to a frequentist forward variable selection approach and a Bayesian shrinkage method using a horseshoe prior. Further, to measure the uncertainty of estimates obtained from random forests and the LASSO, we propose a modification of the split conformal procedure that relaxes the assumption of exchangeable data. We show that the proposed method yields intervals with the correct coverage rate and this is confirmed through a simulation study. This work is motivated by Ghanaian data available from the sixth Ghana Living Standards Survey (GLSS) and the 2010 Population and Housing Census, in the Greater Accra Metropolitan Area (GAMA) region, which comprises eight districts that are further divided into enumeration areas (EAs). We estimate the areal mean household log consumption using both datasets. The outcome variable is measured only in the GLSS for 3 percent of all the EAs (136 out of 5019) and 174 potential covariates are available in both datasets. In the application, among the four modeling methods considered, the Bayesian shrinkage performed the best in terms of bias, mean squared error (MSE), and prediction interval coverages and scores, as assessed through a cross-validation study. We find substantial between-area variation with the estimated log consumption showing a 1.3-fold variation across the GAMA region. The western areas are the poorest while the Accra Metropolitan Area district has the richest areas.