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OCR for page 105
Appendix E
Composite Estimation
This appendix briefly presents the simplest composite estimator for
a rotating panel design. There is an extensive literature on composite es-
timation to which the reader can turn for descriptions of more elaborate
approaches.
This discussion assumes an annual data collection. Let θt denote a
ˆ
parameter to be estimated in year t, and let θ t denote the “usual unbiased
estimate” of θt based only on data from time t. Note that it is also possible
ˆ
to compute an estimate θ t ,m based only on the overlapping (or “matched”)
sample, i.e., using only the sample that is being interviewed for the second
time (or more). Since values exist from the previous year for the matched
ˆ ˆ
ˆ
sample, it is possible to compute θ t –1,m , and so θ t ,m – θ t −1,m is an estimate
of the change between year t and year t –1 based on the same sample units.
By adding this estimate of change to last year’s estimate of θt–1, a second
ˆ ˆ ˆ
estimate of θt, namely, θ t −1 + θ t ,m – θ t −1,m is obtained. (In words, the estimate
for this year is equal to the estimate for last year plus the estimated year-to-
year change.) Since there are now two estimates of the same quantity θt, it is
natural to combine them to obtain an improved estimate. Thus the so-called
ˆ ˆ ˆ ˆ ˆ
composite estimate of θt is θ tc = αθ t + (1 – α )(θ t −1 + θ t ,m – θ t −1,m ), a weighted
ˆ
average of two estimates (assuming a is between 0 and 1). Because θ tc−1 is a
ˆ , then in practice, the following composite estimate
better estimate than θ t –1
ˆ ˆ ˆ ˆ ˆ
is used: θtc = αθ t + (1 – α )(θ tc−1 + θ t ,m – θ t −1,m ).
ˆ
The value of a is chosen to minimize the variance of θ tc .
105
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