Estimating unemployment in very small areas

Abstract

In the last few years, European countries have shown a deep interest in applying small area techniques to produce reliable estimates at county level. However, the specificity of every European country and the heterogeneity of the available auxiliary information, make the use of a common methodology a very difficult task. In this study, the performance of several design-based, model-assisted, and model-based estimators using different auxiliary information for estimating unemployment at small area level is analyzed. The results are illustrated with data from Navarre, an autonomous region located at the north of Spain and divided into seven small areas. After discussing pros and cons of the different alternatives, a composite estimator is chosen, because of its good trade-off between bias and variance. Several methods for estimating the prediction error of the proposed estimator are also provided.