A Practical Guide to Selecting and Blending Approaches for Clustered Data: Clustered Errors, Multilevel Models, and Fixed Effect Models

Psychological data are often clustered within organizational units, which violates the independence assumption in standard regression models. Clustered errors, multilevel models, and fixed effects models all address this issue, but in different ways. Disciplinary preferences for approaching clustered data are strong, which can restrict questions researchers ask because certain approaches are better equipped to handle particular types of questions. Resources comparing approaches to facilitate broader understanding of clustered data approaches exist for economists, political scientists, and biostatisticians. Existing resources use concepts and terminology consistent with statistical training in other disciplines, so this paper provides a resource using language and principles familiar to psychologists. The paper starts by walking through the origin and importance of the independence assumption to motivate the problem and emergence of different solutions in different fields. Then, information on clustered errors, multilevel models, and fixed effect models is provided, including (a) how each approach addresses independence violations, (b) research questions ideally suited for each approach, and (c) example analyses highlighting advantages and disadvantages. The paper then discusses how these approaches are not mutually exclusive but instead can be blended together to create tailor-made models that flexibly accommodate idiosyncrasies in research questions and are robust to nuances of a particular dataset. The broader theme is that there is no one-size-fits-all approach to clustered data. The researchquestion—not disciplinary preferences—should inform the statistical approach. Wider appreciation of the landscape of clustered data approaches can expand the questions researchers ask and improve the theoretical foundation of statistical models.