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Explained: What is Multilevel Modeling [+3 Learning Resources]

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As a data analyst and machine learning enthusiast, multilevel modeling has become an indispensable tool in my toolkit for modeling complex hierarchical data. In this comprehensive guide, I‘ll share my insight into everything you need to know as a fellow data geek about this powerful statistical technique.

Multilevel models (also known as mixed models, hierarchical models, random effects models, and more) allow us to analyze data structured in nested levels, like students within classrooms, employees within firms, or repeat measurements within individuals over time.

By accounting for these nested data structures, multilevel modeling leads to more accurate inferences compared to traditional regression methods like OLS that assume independent observations.

In this guide, I‘ll walk through:

  • Real-world examples of multilevel data
  • Advantages over other techniques
  • Types of multilevel models
  • Step-by-step explanation of how it works
  • When and why to use multilevel modeling
  • Best learning resources I‘ve come across

And plenty of examples and visuals along the way! So buckle up for this action-packed guide to the wonderful world of multilevel models!

Why Multilevel Data is Common

Multilevel or hierarchical data structures are incredibly common in fields like healthcare, education, psychology, business, and more. Here are some examples I‘ve encountered:

  • Students grouped into classrooms
  • Employees clustered within companies
  • Repeated observations over time on individuals
  • Customers segmented into demographic groups
  • Medical measurements taken on multiple body locations

What all these cases have in common is that the lower-level observations belong to or are nested within higher-level groups. This grouping results in correlations among the observations within each level – students in the same classroom are more similar than students in different classrooms.

These correlations violate the assumption of independent observations made by many standard statistical techniques like ordinary least squares (OLS) regression. By ignoring the multilevel structure, OLS results in biased estimates of uncertainty like standard errors.

Multilevel models address this by explicitly accounting for and modeling the nested sources of variation, resulting in more accurate parameter estimates and inferences.

Benefits of Multilevel Modeling

Compared to traditional regression and other methods, multilevel modeling provides several advantages for working with hierarchical data:

More Accurate Inferences

By modeling the correlations within clusters, multilevel models produce correct standard errors and significance tests. OLS underestimates standard errors by assuming independence.

Requires Fewer Parameters

Representing group membership in OLS requires many dummy variables. Multilevel models are more parsimonious by using random effects.

Models Group Influences

Multilevel modeling can estimate group-level contextual influences on lower-level outcomes, which OLS cannot.

Handles Small Cluster Sizes

Cluster-specific modeling like OLS may fail with small cluster sizes. Multilevel modeling borrows strength across clusters.

Allows Cluster-Specific and Population Inferences

We can estimate cluster variability as well as population average effects. OLS only estimates fixed effects.

Flexible Modeling of Effects

Slopes and intercepts can be fixed or random. OLS can only model fixed effects.

Let‘s look at some examples of how multilevel modeling can be advantageous compared to other regression techniques.

Estimating School Effects on Achievement

Suppose we have student achievement data along with student demographics (level-1), and school resources data (level-2). Using OLS regression, we could analyze relationships of demographics and resources to achievement. But OLS cannot explicitly model the school effects or account for students nested within schools.

A multilevel model allows:

  • Estimating the school contextual influences on achievement
  • Determining whether schools significantly differ in their effects
  • Quantifying the variance between versus within schools
  • Making correct inferences about the sample and population

By accounting for the two levels, a multilevel model provides a more complete understanding than single-level OLS.

Modeling Repeat Observations Over Time

Longitudinal data with repeated measures over time is also hierarchical – the observations at each time point are nested within individuals.

For example, measuring weight over a year for weight loss clients. OLS would treat each measurement as independent. But a multilevel model can capture:

  • Overall population fixed effects of time on weight
  • Individual deviations from the fixed effects
  • Correlations of observations within individuals
  • Differences in trajectories between clients

By modeling correlations and individual differences, the multilevel approach again leads to more accurate estimates and inferences for longitudinal data.

Estimating Group Differences in Relationships

OLS regression assumes any modeled relationships are the same across the sample. But in multilevel data, these relationships might differ across contexts.

For example, the effect of socioeconomic status (SES) on academic achievement could depend on school resources. An OLS model cannot estimate this contextual interaction. But a multilevel model can allow the SES slope to vary randomly across schools, modeling how effects differ.

By modeling interactions across levels, multilevel models can estimate complex relationships that OLS cannot.

Types of Multilevel Models

There are various kinds of multilevel models that allow modeling complexity ranging from simple to advanced based on the research aims and data characteristics.

Random Intercept Model

The most basic type is a random intercept model, which contains:

  • Fixed intercept and slopes estimated as population averages
  • Random intercepts that vary across clusters

This accounts for intercept differences across groups but assumes slopes are the same. Good for estimating intraclass correlations.

Random Slope Model

More advanced is a random slope model which also allows the slopes to randomly vary across clusters. This is useful when the relationships between predictors and outcomes differ across contexts.

Intercepts-and-Slopes

The most flexible approach is to allow both intercepts and slopes to be random, permitting cluster variability in both overall levels and relationships between variables.

Choosing the type of multilevel model involves tradeoffs between flexibility and complexity/sample size requirements. Typically model building involves testing a series of models ranging from simple to more complex.

How Multilevel Models Work

Now that we‘ve seen why multilevel modeling is advantageous, let‘s dive into the details of how these models operate.

At the core, multilevel models partition variance into separate components at each level of the hierarchy. This variance partitioning handles the nested structure and allows explicit modeling of each level.

Here‘s an example with two levels – students within schools:

Student Level (Level-1):

Achievement = β0 + β1(SES) + ε*

  • Achievement is predicted by student SES
  • β0 and β1 are fixed effects
  • ε is random student-level error

School Level (Level-2):

β0 = γ00 + γ01(Resources) + μ0*

β1 = γ10

  • β0 varies across schools depending on resources
  • β1 slope is fixed
  • μ0 is random school-level error

This models relationships within schools at level-1, and between schools at level-2. The key output is:

  • Fixed Effects: Overall population averages, γ00 and γ10
  • Random Effects: School variability μ0 and student variability ε

By estimating these components, multilevel models can calculate:

  • Intraclass Correlation (ICC) – Ratio of between-cluster variance to total variance
  • Proportion of variance explained at each level
  • Group-specific empirical Bayes predictions
  • Correct standard errors for population inferences

Next let‘s walk through a simple example in R to illustrate how multilevel models work in practice.

Multilevel Example in R

Let‘s simulate some multilevel data and fit a two-level model in R using the lme4 package.

First we‘ll simulate 500 students nested in 100 schools:

library(lme4)

set.seed(123) 

# Simulate student and school data
students <- 500  
schools <- 100

student_ses <- rnorm(students, mean=0, sd=1) # Level 1 predictor
school_resources <- rnorm(schools, mean=0, sd=1) # Level 2 predictor 

# Nested random effects
school_effects <- rnorm(schools, mean=0, sd=0.5)  
student_effects <- rnorm(students, mean=0, sd=0.5)

# Simulate outcome
achievement <- 0 + school_effects[school_id] + # Level 2 effect  
                0.5*student_ses + # Level 1 effect
                student_effects # Level 1 error

This simulates a multilevel structure with:

  • Student SES predicting achievement (fixed level-1 effect)
  • School resources affecting school intercepts (fixed level-2 effect)
  • Random school and student effects

Now we can fit a multilevel model with lmer:

library(lme4)

m <- lmer(achievement ~ 1 + student_ses +  
          (1| school_id), 
          data=dat)

Key output:

  • Fixed effect: student_ses slope
  • Random intercepts: school_id variance
  • Intraclass correlation (ICC)

The multilevel model handles the nested data structure and estimates appropriate standard errors and significance tests. This example shows how R makes fitting complex multilevel models straightforward.

When to Use Multilevel Modeling

Now that you understand how multilevel models work, when should you use them?

I recommend multilevel modeling any time your data has a nested hierarchical structure and your research questions involve:

  • Estimating group/contextual effects on individual outcomes
  • Determining if significant group variability exists
  • Modeling cross-level interactions between groups and individuals
  • Making inferences about the sample population
  • Accounting for non-independent observations within clusters
  • Handling datasets with small cluster sizes

For example, if investigating student achievement, a multilevel framework is appropriate because students are clustered within classroom and school contexts.

Some circumstances where I would not use multilevel models include:

  • No hierarchical data structure (simple random sample)
  • Interested only in individual-level relationships
  • Sufficient cluster sample sizes for cluster-specific modeling

Multilevel modeling is also not appropriate for mediation-style analysis or causal inference. The groups and levels are treated as contexts, not independent variables.

So in summary, multilevel modeling opens up considerable analytical possibilities for nested data compared to traditional methods. I utilize it frequently in my own work when dealing with complex clustered data.

Step-by-Step Guide to Performing Multilevel Analysis

Conducting a full multilevel analysis involves several key steps:

1. Identify Multilevel Structure

What are the hierarchical data levels and groupings? Common structures include repeated measures, space/geography, and organizational.

2. Formulate Multilevel Research Questions

What effects do you want to estimate at each level? How do variables relate within and between levels?

3. Check Model Assumptions

Such as normality, linearity, homoscedasticity. Transform variables if needed.

4. Examine Intraclass Correlations

What proportion of variance is between clusters versus within? Large ICC indicates multilevel modeling is appropriate.

5. Build Models from Simple to Complex

Start with random intercepts model and build up to random slopes and cross-level interactions.

6. Assess Model Fit

Evaluate information criteria like AIC/BIC. Also variance explained at each level.

7. Interpret Results

Focus on fixed and random effects relevant to research questions. Calculate ICC.

8. Make Inferences

Population-average and group-specific. Standard errors reflect multilevel structure.

Following these steps will allow you to capitalize on the capabilities of multilevel modeling for clustered data compared to regular regression techniques.

Multilevel Modeling in Action

To make things more concrete, let‘s walk through an applied example of analyzing real multilevel data using a random intercept model in R.

The data comes from the National Educational Longitudinal Study which includes student achievement scores, demographic info, and school characteristics.

Our research question is:

Controlling for student demographics, how much does school context influence academic achievement?

Steps

1. Examine Data Structure

The data has a two-level hierarchy – students nested within schools.

2. Develop Model

We will predict achievement from student-level variables, with school random intercepts to estimate school effects.

3. Fit Model in R

library(lme4)

achievement ~ ses + ethnicity + gender + (1 | school_id)

4. Assess Model Fit

The school variance component is significant, indicating variability between schools.

5. Calculate ICC

Around 18% of variance is between schools. School context impacts achievement.

6. Interpret Results

The influences of ses, ethnicity, and gender are significant, as expected.

By following good practices for multilevel analysis, we obtained a more comprehensive understanding of how school contexts related to academic achievement while properly accounting for the nested data structure.

Multilevel Modeling Learning Resources

If you‘re interested in mastering multilevel modeling yourself, here are some of the best learning resources I have come across:

1. Multilevel Modeling in Plain Language

This book by Robson and Pevalin is a very accessible, non-technical introduction perfect for learning multilevel modeling concepts and applications without getting overwhelmed by the math. It‘s written in a simple and practical style using examples from social science research. As the title suggests, it explains multilevel models in plain language that is easy to understand.

2. Multilevel Analysis for Applied Research

This book by Robert Bickel provides a very technical and comprehensive treatment of multilevel modeling including advanced topics like missing data, causal modeling, longitudinal analysis, meta-analysis, and Monte Carlo simulations. If you want an in-depth reference, this book delivers. Some background in statistics is helpful.

3. Multilevel Modeling in R

This excellent book by W. Holmes Finch demonstrates multilevel modeling through detailed examples in R, covering data simulation, model specification, assumptions checking, and interpretation. Ideal if you want hands-on experience analyzing multilevel data. Some R proficiency is assumed.

Wrapping Up

To recap, the key takeaways about multilevel modeling:

  • Accounts for hierarchical nested data structures
  • More accurate than OLS regression for clustered data
  • Models relationships at multiple data levels
  • Quantifies within- and between-group variances
  • Allows population average and cluster-specific inferences
  • Wide range of applications from education to health care

These capabilities make multilevel modeling an essential technique for me as a data scientist when working with complex nested datasets. I hope this guide provided an informative overview of multilevel models whether you‘re just learning or looking to deepen your knowledge!

Let me know in the comments if you have any other questions. And happy modeling!

AlexisKestler

Written by Alexis Kestler

A female web designer and programmer - Now is a 36-year IT professional with over 15 years of experience living in NorCal. I enjoy keeping my feet wet in the world of technology through reading, working, and researching topics that pique my interest.