A Calibrated Data-Driven Approach for Small Area Estimation using Big Data

Abstract: Where the response variable in a big data set is consistent with the variable of interest for small area estimation, the big data by itself can provide the estimates for small areas. These estimates are often subject to the coverage and measurement error bias inherited from the big data. However, if a probability survey of the same variable of interest is available, the survey data can be used as a training data set to develop an algorithm to impute for the data missed by the big data and adjust for measurement errors. In this paper, we outline a methodology for such imputations based on an kNN algorithm calibrated to an asymptotically design-unbiased estimate of the national total and illustrate the use of a training data set to estimate the imputation bias and the fixed - asymptotic bootstrap to estimate the variance of the small area hybrid estimator. We illustrate the methodology of this paper using a public use data set and use it to compare the accuracy and precision of our hybrid estimator with the Fay-Harriot (FH) estimator. Finally, we also examine numerically the accuracy and precision of the FH estimator when the auxiliary variables used in the linking models are subject to under-coverage errors.