IDEAS home Printed from
   My bibliography  Save this article

Cluster effects and simultaneity in multilevel models


  • Richard Blundell

    (Department of Economics, University College London and Institute for Fiscal Studies, London, UK)

  • Frank Windmeijer

    (Institute for Fiscal Studies, London, UK)


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. © 1997 John Wiley & Sons, Ltd.

Suggested Citation

  • Richard Blundell & Frank Windmeijer, 1997. "Cluster effects and simultaneity in multilevel models," Health Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 439-443.
  • Handle: RePEc:wly:hlthec:v:6:y:1997:i:4:p:439-443 DOI: 10.1002/(SICI)1099-1050(199707)6:4<439::AID-HEC276>3.0.CO;2-B

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    1. Wagstaff, Adam, 1986. "The demand for health : Some new empirical evidence," Journal of Health Economics, Elsevier, vol. 5(3), pages 195-233, September.
    2. Mullahy, John, 1986. "Specification and testing of some modified count data models," Journal of Econometrics, Elsevier, vol. 33(3), pages 341-365, December.
    3. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    4. van Doorslaer, Eddy & Wagstaff, Adam & van der Burg, Hattem & Christiansen, Terkel & De Graeve, Diana & Duchesne, Inge & Gerdtham, Ulf-G & Gerfin, Michael & Geurts, Jose & Gross, Lorna, 2000. "Equity in the delivery of health care in Europe and the US," Journal of Health Economics, Elsevier, vol. 19(5), pages 553-583, September.
    5. A. C. Cameron & P. K. Trivedi & Frank Milne & J. Piggott, 1988. "A Microeconometric Model of the Demand for Health Care and Health Insurance in Australia," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 85-106.
    6. Duan, Naihua, et al, 1983. "A Comparison of Alternative Models for the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 115-126, April.
    7. O'Donnell, Owen & Propper, Carol, 1991. "Equity and the distribution of U.K. National Health Service resources," Journal of Health Economics, Elsevier, vol. 10(2), pages 247-249, July.
    8. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    9. Culyer, A. J. & van Doorslaer, Eddy & Wagstaff, Adam, 1992. "Utilisation as a measure of equity by Mooney, Hall, Donaldson and Gerard," Journal of Health Economics, Elsevier, vol. 11(1), pages 93-98, May.
    10. Muurinen, Jaana-Marja, 1982. "Demand for health: A generalised Grossman model," Journal of Health Economics, Elsevier, vol. 1(1), pages 5-28, May.
    11. Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, number gros72-1, January.
    12. Cameron, A Colin & Trivedi, Pravin K, 1986. "Econometric Models Based on Count Data: Comparisons and Applications of Some Estimators and Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(1), pages 29-53, January.
    13. Cameron, A. Colin & Trivedi, Pravin K., 1990. "Regression-based tests for overdispersion in the Poisson model," Journal of Econometrics, Elsevier, vol. 46(3), pages 347-364, December.
    14. van Doorslaer, Eddy & Wagstaff, Adam, 1992. "Equity in the delivery of health care: some international comparisons," Journal of Health Economics, Elsevier, vol. 11(4), pages 389-411, December.
    15. Wagstaff, Adam & van Doorslaer, Eddy & Paci, Pierella, 1991. "On the measurement of horizontal inequity in the delivery of health care," Journal of Health Economics, Elsevier, vol. 10(2), pages 169-205, July.
    16. Le Grand, Julian, 1978. "The Distribution of Public Expenditure: The Case of Health Care," Economica, London School of Economics and Political Science, vol. 45(178), pages 125-142, May.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Luisa Corrado & Bernard Fingleton, 2012. "Where Is The Economics In Spatial Econometrics?," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 210-239, May.
    2. Roy Carr-Hill & Paul Dixon & Russell Mannion & Nigel Rice & Kai Rudat & Ruth Sinclair & Peter Smith, 1997. "A model of the determinants of expenditure on children's personal social services," Working Papers 030cheop, Centre for Health Economics, University of York.
    3. Richard Blundell & Frank Windmeijer, 2000. "Identifying demand for health resources using waiting times information," Health Economics, John Wiley & Sons, Ltd., vol. 9(6), pages 465-474.
    4. Rabe-Hesketh, Sophia & Skrondal, Anders & Pickles, Andrew, 2005. "Maximum likelihood estimation of limited and discrete dependent variable models with nested random effects," Journal of Econometrics, Elsevier, vol. 128(2), pages 301-323, October.
    5. Thompson, Simon G. & Nixon, Richard M. & Grieve, Richard, 2006. "Addressing the issues that arise in analysing multicentre cost data, with application to a multinational study," Journal of Health Economics, Elsevier, vol. 25(6), pages 1015-1028, November.
    6. Nigel Rice & Paul Dixon & David Lloyd & David Roberts, 1999. "Derivation of a needs based capitation formula for allocation prescribing budgets," Working Papers 034cheop, Centre for Health Economics, University of York.
    7. Kathleen Carey, 2000. "A multilevel modelling approach to analysis of patient costs under managed care," Health Economics, John Wiley & Sons, Ltd., vol. 9(5), pages 435-446.
    8. Marc Saez & Carme Saurina & Germà Coenders & Sònia González-Raya, 2006. "Use of primary health care services according to the different degrees of obesity in the Girona Health Region, Spain," Health Economics, John Wiley & Sons, Ltd., vol. 15(2), pages 173-193.
    9. Bache, Stefan Holst Milton & Kristensen, Troels, 2013. "A simple but efficient approach to the analysis of multilevel data," COHERE Working Paper 2013:6, University of Southern Denmark, COHERE - Centre of Health Economics Research.
    10. Guillem López-Casasnovas & Marc Saez, 2007. "A multilevel analysis on the determinants of regional health care expenditure: a note," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 8(1), pages 59-65, March.
    11. Matthew Sutton & Peter Lock, 2000. "Regional differences in health care delivery: implications for a national resource allocation formula," Health Economics, John Wiley & Sons, Ltd., vol. 9(6), pages 547-559.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:hlthec:v:6:y:1997:i:4:p:439-443. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.