I am thinking about a 2-step analysis design with a 2-level data set:
Stage1. Calibrate a variance component model with level-1 response and
level-1 IVs, which has a random intercept varying across the level-2 units;
Stage 2. Use the random intercept as the DV to regress on level-2 IVs.

The reason I am considering this is that my second level units have some
complex non-conventional correlation structure (spatial autocorrelation)
that I need to handle. It seems that the 2-stage approach allows me to use
specialized packages to model it.

But I am not sure if this is a valid approach. Your thoughts are highly
appreciated.

REGARDS,
Junyan

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