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Semiparametric models combining both non-parametric trends and small area random effects are now currently being investigated in small area estimation (SAE). These models can prevent bias when the functional form of the relationship between the response and the covariates is unknown. Furthermore, penalized spline regression can be a good tool to incorporate non-parametric regression models into the SAE techniques, as it can be represented as a mixed effects model. A penalized spline model is considered to analyze trends in small areas and to forecast future values of the response. The prediction mean squared error (MSE) for the fitted and the predicted values, together with estimators for those quantities, are derived. The procedure is illustrated with real data consisting of average prices per squared meter of used dwellings in nine neighborhoods of the city of Vitoria, Spain, during the period 1993-2007. Dwelling prices for the next five years are also forecast. A simulation study is conducted to assess the performance of both the small area trend estimator and the prediction MSE estimators. The results confirm a good behavior of the proposed estimators in terms of bias and variability.

Disease mapping studies have experienced an enormous development in the last twenty years. Both an Empirical Bayes (EB) and a Fully Bayes (FB) approach have been used for smoothing purposes. However, an excess of smoothing might hinder the detection of true high-risk areas. Identifying these extreme regions minimizing the misclassification of background or normal areas, and then, avoiding false alarms is crucial in epidemiology. Bayesian decision rules, based on the posterior distribution of the relative risks, have been investigated for this task, but no similar studies have been conducted under the EB approach. Within this framework, second order correct estimators of the MSE of the log-relative risk predictor can be used to build appropriate confidence intervals for the relative risks. Their ability to detect high-risk areas is investigated through a simulation study using the geographical structure of the well-known Scottish lip cancer data. Bayesian credibility intervals and decision rules, based on the posterior distribution of the relative risks, are also investigated to check if any of the approaches outperforms the others when classifying high-risk regions. The conclusion is that Bayesian decision rules, exploiting the posterior distribution of the relative risks, are more powerful to detect high-risk areas than EB confidence intervals, but no general rules can be defined as a global criterion to be routinely applied in every real setting.

This article discusses and evaluates penalized quasi-likelihood (PQL) estimation techniques for the situation where random effects are correlated, as is typical in mapping studies. This is an approximate fitting technique which uses a Laplace approximation to the integrated mixed model likelihood. It is much easier to implement than usual maximum likelihood estimation. Our results show that the PQL estimates are reasonably unbiased for analysis of mixed Poisson models when there is correlation in the random effects, except when the means are sufficiently small to yield sparse data. However, although the normal approximation to the distribution of the parameter estimates works fairly well for the parameters in the mean it does not perform as well for the variance components. In addition, when the mean mortality counts are small, the estimated standard errors of the variance components tend to become more biased than those for the mean. We illustrate our approaches by applying PQL for mapping mortality in British Columbia, Canada, over the five-year period 1985–1989.