Hierarchical Bayes estimation of spatial statistics for rates

The U.S. Bureau of Labour Statistics publishes monthly unemployment rate estimates for its 50 states, the District of Columbia, and all counties, under Current Population Survey. However, the unemployment rate estimates for some states are unreliable due to low sample sizes in these states. Datta et al. (1999) proposed a hierarchical Bayes (HB) method using a time series generalization of a widely used cross-sectional model in small-area estimation. However, the geographical variation is also likely to be important. To have an efficient model, a comprehensive mixed normal model that accounts for the spatial and temporal effects is considered. A HB approach using Markov chain Monte Carlo is used for the analysis of the U.S. state-level unemployment rate estimates for January 2004–December 2007. The sensitivity of such type of analysis to prior assumptions in the Gaussian context is also studied.