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Gan State University 2 Department of Statistics, Texas A& M University January 5, 2012 Summary We propose a new approach to small area estimation based on joint modelling of means and variances. The proposed model and methodology not only improve small area estimators but also yield smoothed estimators of the true sampling variances. Maximum likelihood estimation of model parameters is carried out using EM algorithm due to the non-standard form of the likelihood function. Confidence inter.
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