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Cluster effects and simultaneity in multilevel models

✍ Scribed by Richard Blundell; Frank Windmeijer

Publisher: John Wiley and Sons
Year: 1997
Tongue: English
Weight: 100 KB
Volume: 6
Category: Article
ISSN: 1057-9230
DOI: 10.1002/(sici)1099-1050(199707)6:4<439::aid-hec276>3.0.co;2-b

No coin nor oath required. For personal study only.

✦ Synopsis

For small group sizes, the GLS estimator in multilevel models is biased and inconsistent when the random cluster effects are correlated with the regressors. A fixed effects approach, conditioning on the cluster effects, provides consistent estimates for the slope parameters. The two estimators are equivalent when group sizes are large. The same results obtain for two-stage estimation procedures that allow for some of the regressors to be simultaneously determined with the dependent variable. The GLS and fixed effects estimators are applied to data on acute care hospital utilization in the UK, allowing for health authority district effects.

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