Estimating Small-Area Income Deprivation: An Iterative Proportional Fitting Approach

Abstract

Small-area estimation, in particular the estimation of small-area income deprivation, has potential value in the development of new or alternative components of multiple deprivation indices. These new approaches enable the development of income distribution threshold-based measures of income deprivation as opposed to benefit count-based measures of income deprivation and so enable the alignment of regional and national measures such as the Households Below Average Income with small-area measures. This chapter briefly reviews a number of approaches to small-area estimation before describing in some detail an iterative proportional fitting based spatial microsimulation approach. This approach is then applied to the estimation of small-area HBAI rates at the small-area level in Wales in 2003--2005. This chapter discusses the results of this approach, contrasts them with contemporary `official' income deprivation measures for the same areas and describes a range of ways to assess the robustness of the results.