Policy-related small.area estimation

A method of small-area estimation with a utility function is developed. The utility characterises a policy planned to be implemented in each area, based on the area’s estimate of a key quantity. It is shown that the commonly applied empirical Bayes and composite estimators are inefficient for a wide range of utility functions. Adaptations for limited budget to implement the policy are explored. An argument is presented for a closer integration of estimation and (regional) policy making.