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st: Clustering vs. Indicator variables in a Logit
I understand that clustering specifies that observations be independent
across groups while allowing for changes in variance within a group. My
question is how is this different than controlling for a group with an
indicator (0/1) variables.
For example, If my data contains patient data for 12 hospitals and my LHS
variable is (0/1) for recovery and my RHS variables include characteristic
variables, treatment type, etc. What is the difference between clustering
on hospital or creating an indicator variable for each hospital?
Thanks in advance for any commentary,
David J. Bernstein, Ph.D.
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