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Educational researchers commonly use the rule of thumb of “design effect smaller than 2” as the justification of not accounting for the multilevel or clustered structure in their data. The rule, however, has not yet been systematically studied in previous research. In the present study, we generated data from three different models (which differ in the location of the clustering effect). With a 3 (design effect) × 5 (cluster size) × 4 (number of clusters) Monte Carlo simulation study we found that the rule should not be applied when researchers: (a) are interested in the effects of higher-level predictors, or (b) have a cluster size less than 10. Implications of the findings and limitations of the study are discussed.
Lai et al. (Mon,) studied this question.