Small area estimation using Fay-Herriot area level model with sampling variance smoothing and modeling

In this paper, we consider the Fay-Herriot model for small area estimation. In particular, we are interested in the impact of sampling variance smoothing and modeling on the model-based estimates. We present methods of smoothing and modeling for the sampling variances and apply the proposed models to a real data analysis. Our results indicate that sampling variance smoothing can improve the efficiency and accuracy of the model-based estimator. For sampling variance modeling, the HB models of You (2016) and Sugasawa, Tamae and Kubokawa (2017) perform equally well to improve the direct survey estimates.