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We consider the problem of distributed estimation in a power constrained collaborative wireless sensor network (WSN), where the network is divided into a set of sensor clusters, with collaboration allowed among sensors within the same cluster but not across clusters. Specifically, each cluster forms one or multiple local messages via sensor collaboration (in particular, linear operation is considered) and transmits the messages over noisy channels to a fusion center (FC). The final estimate is constructed at the FC based on the noisy data received from all clusters. In this collaborative setup, we study the following fundamental problems. Given a total transmit power constraint, shall we transmit the raw data or some low-dimensional local messages for each cluster? What is the optimal collaboration scheme for each cluster? How to optimally allocate the power among different clusters? These questions are addressed in this paper.