Small Area Models

Abstract

This chapter focuses on explicit small area models that make specific allowance for between-area variation. In particular, it introduces mixed models involving random area-specific effects that account for between-area variation beyond that explained by auxiliary variables included in the model. The models may be classified into two broad types: (i) Aggregate level (or area level) models that relate the small area means to area-specific auxiliary variables. Such models are essential if unit (element) level data are not available. (ii) Unit level models that relate the unit values of the study variable to unit-specific auxiliary variables. Models involving both unit level and area level auxiliary variables are also studied.