A general class of small area estimation using calibrated hierarchical likelihood approach with applications to COVID-19 data

Abstract

The direct estimation techniques in small area estimation (SAE) models require sufficiently large sample sizes to provide accurate estimates. Hence, indirect model-based methodologies are developed to incorporate auxiliary information. The most commonly used SAE models, including the Fay-Herriot (FH) model and its extended models, are estimated using marginal likelihood estimation and the Bayesian methods, which rely heavily on the computationally intensive integration of likelihood function. In this article, we propose a Calibrated Hierarchical (CH) likelihood approach to obtain SAE through hierarchical estimation of fixed effects and random effects with the regression calibration method for bias correction. The latent random variables at the domain level are treated as ‘parameters’ and estimated jointly with other parameters of interest. Then the dispersion parameters are estimated iteratively based on the Laplace approximation of the profile likelihood. The proposed method avoids the intractable integration to estimate the marginal distribution. Hence, it can be applied to a wide class of distributions, including generalized linear mixed models, survival analysis, and joint modeling with distinct distributions. We demonstrate our method using an area-level analysis of publicly available count data from the novel coronavirus (COVID-19) positive cases.

KEYWORDS:

• Small area estimation
• hierarchical $(h)$-likelihood
• bias correction
• COVID-19

Acknowledgments

We thank two referees and the Associate Editor for suggestions that led to substantial improvement of this paper. We acknowledge the Holland Computing Center of the University of Nebraska at Lincoln (HCC-UNL) for providing computing resources to conduct simulation studies.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Role of funder

The funding agency had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.

Additional information

Funding

This work was supported by Robert Wood Johnson Foundation: [Grant Number 76985].