Expenditure Per Capita Model with Spatial Small Area Estimation

Abstract

Indonesia is one of many countries around the world that attempt to suffer from high poverty rates. Since, poverty information in a certain area is a point of interest to researchers and policy makers. One problem faced is for the development program to be carried out more effectively and efficiently, it is necessary to have data availability up to the micro-scale. The technique used to reach the goal is Small Area Estimation (SAE). Fay-herriot (FH) model is one method on Small Area Estimation. Since, the SAE techniques require “borrow strength” across neighbor areas so thus Fay-Herriot model approach was developed by integrating spatial information into the model. This method known as Spatial Fay-Herriot Model (SFH) or Spatial Empirical Best Linear Unbiased Prediction (SEBLUP). This study aims to compare MSE of direct estimation, FH, and SFH Model to see which method gives the best result in estimating expenditure. The MSE value of the estimated SFH is smaller than direct estimation and FH, but it does not significant. It means adding spatial information in the small area estimation model does not give a better prediction than the simple small area estimation which is takes account the area as a specific random effect.