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Factor models for ordinal variables with covariate effects on

the manifest and latent variables: A comparison of LISREL


and IRT approaches.

Irini Moustaki1
Statistics Department
Athens University of Economics and Business
Karl G Joreskog
Department of Information Science
Uppsala University
Dimitris Mavridis
Statistics Department
Athens University of Economics and Business

We consider a general type of model for analyzing ordinal variables with covariate
effects and two approaches for analyzing data for such models, the item response theory
(IRT) approach and the PRELIS-LISREL (PLA) approach. We compare these two ap-
proaches on the basis of two examples, one involving only covariate effects directly on the
ordinal variables, and one involving covariate effects on the latent variables in addition.

INTRODUCTION
Latent variable models are used in social sciences for analyzing interrelationships
among observed variables. Latent variables are usually constructs that are not directly
measured such as intelligence, emotion, political belief, wealth, stress. Those unobserved
constructs are assumed to be measured through a set of observed variables also called
indicators. Methodology exists for analyzing discrete, continuous and categorical indicators.
The well known factor analysis model is a special case of a latent variable model with
indicators measured on a continuous scale.
The main idea behind latent variable models is that the latent variables account for
the dependencies among the indicators. The number of latent variables required is much
smaller than the indicators. In applications, it might be the case that additional covariates
or explanatory variables are required together with the latent variables to account for the
associations among the indicators. One might also be interested in measuring the effect of
explanatory variables (e.g. demographic variables) on the latent variables identified from
the model.
This paper looks at latent variable models for ordinal indicators that allow for co-
variate effects both on the indicators and on the latent variables. We concentrate here on
ordinal indicators since they are frequently met in social applications. The paper does not
aim to develop new methodology for handling ordinal data but rather to compare existing
methodologies in the literature in terms of easiness in fitting the models, model parameters
1
Request for reprints should be sent to Irini Moustaki, Athens University of Economics and Business,
Department of Statistics, 76 Patission Street, Athens 104 34, Greece. Email:moustaki@aueb.gr
and goodness-of-fit. The two approaches are the structural equation modelling (SEM) ap-
proach and the item response theory (IRT) approach. Regarding the SEM approach we will
concentrate here in the PRELIS-LISREL approach (PLA).
A latent variable model consists of two parts. The part of the model that accommo-
dates the effect of the latent variables and a set of observed covariates on the indicators
and is called here the measurement model with direct effects (to distinguish it from the
measurement model that only allows for latent variables) and the part of the model that
links a set of observed covariates with the latent variables and is called the structural part
of the model. Therefore, covariates are allowed to affect the indicators indirectly through
the latent variables or directly. However, there might be situations where one would like to
model the effect of a set of covariates on the latent variables and the effect of a different
set of covariates directly on the indicators. In the applications section, we discuss an ex-
ample in which we are interested in measuring overall satisfaction (latent variable) with the
National Health Service in respondents area from five ordinal indicators controlling for the
respondents political affiliation (observed covariate). In addition we allow for covariates
age and gender to affect the latent construct satisfaction.
In the literature there are two main approaches for conducting latent variable analysis.
One is the underlying variable approach (UVA) developed within the structural equation
modelling framework (SEM) which provides a general model that allows for covariate effects.
The UVA is supported by commercial software such as LISREL (Joreskog & Sorbom, 1999),
EQS (Bentler, 1992) and Mplus (Muthen & Muthen, 2000). In this paper, we will use
LISREL for computations. The other approach is the item response theory approach (IRT).
Within the IRT approach, latent variable models have recently been extended to allow for
covariate effects. Verhelst, Glas, and Verstralen (1994), Zwinderman (1997) and Glas (2001)
discussed the Rasch or the one parameter logistic model with covariate effects, Sammel,
Ryan, and Legler (1997) discussed an unidimensional latent trait model for binary and
normal outcomes that allow for covariate effects and Moustaki (2003) discussed a multi-
dimensional model for ordinal indicators with covariate effects. The models presented in
Moustaki (2003) will be compared here with the SEM approach. A comparison between
LISREL type models and IRT models for ordinal indicators without covariate effects can be
found in Moustaki (2000) and Joreskog and Moustaki (2001). Here, we extent that work to
more complex models that allow for covariate effects.
In this paper, we present two examples that differ in terms of the covariate effects
included. The first example includes only direct effects of covariates on the ordinal indicators
and the second example includes both direct and indirect effects of covariates. The LISREL
software will be used for the UVA. The LISREL software has two main components: PRELIS
(a preprocessor of LISREL) and LISREL. In PRELIS, the covariance or correlation matrix
is estimated and the measurement and structural model are fitted in LISREL. For the item
response theory approach we have developed our own software.
Latent variable models with covariate effects contain a large number of parameters
and they are very complex. An alternative would be to estimate the effect of covariates
on latent variables in two-stages. The measurement model is fitted first and factor scores
(latent scores) (Moustaki & Knott, 2000) are computed and used as dependent variables for
further analysis. Croon and Bolck (1997) found that the use of factor scores as observed
variables regressed on a set of covariates leads to biased estimates and therefore certain
corrections need to be applied.

NOTATION
Let y0 = (y1 , y2 , , yp ) be a vector of p ordinal indicators. Small letters are used
to denote both the variables and the values that these variables take. Let ci denote the

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number of categories for the ith variable. The latent variables are denoted by a q 1 vector
z0 = (z1 , z2 , , zq ) where q < p. We will distinguish between two different sets of covariates.
Those covariates that affect the latent variables are denoted by w0 = (w1 , w2 , , wk ) and
those that affect the indicators directly by x0 = (x1 , x2 , , xr ). Covariates can be of any
type such as metric or categorical (dummy variables).

LATENT VARIABLE MODELS WITH COVARIATE EFFECTS


Here, we briefly discuss the type of models that will be studied. Figure 1 shows the
relationships that are allowed to be modelled using an example of three ordinal variables
and three covariates. The path diagram shows that the three observed ordinal variables
y0 = (y1 , y2 , y3 ) are indicators of a single latent variable z1 . The latent variable z1 and the
observed covariate x1 account for the associations among the y variables. The direct arrow
from x1 to y1 allows the mean level (here the thresholds) for variable y1 to be different for
different values of the x1 variable. Finally, variables w0 = (w1 , w2 ) have an effect on the
latent variable z1 . For example if w1 is a variable with two categories then the direct arrow
from w1 to z1 indicates that the mean of the latent variable z1 is allowed to be different
across the two groups defined by the w1 variable. Note that variable x1 needs to be different
from variables w for identification reasons. As a result of that an arrow cannot be added
from x1 to z1 when there is already arrows from x1 to all the y variables. Both x1 and w are
considered fixed and they may be correlated. Figure 1 shows all the possible relationships
that can be modelled. In certain applications some of those variables might not exist. For
example, there might be a case where there are only covariates affecting the latent variables
or covariates that only affect the ordinal indicators.

w1 H * y1 
H
HH 


HH  

j
* z1 J
 H
H

 J H
H

w2 
 J
HH j y2 

J *

J
x1


HH J
HHJ
JJ
HH^
j y3 

Figure 1. Path Diagram

ITEM RESPONSE THEORY APPROACH


In the item response theory approach the element of analysis is the whole response
pattern of the sample members. The assumptions made are that of conditional independence
(responses to the p ordinal indicators are independent conditional on the latent variables z
and the set of covariates x) and the multinomial assumption for the conditional distribution
of the ordinal indicators conditional on z and x. The latent variables are taken to be
independent with normal distributions. The normal distribution has rotational advantages.
Correlated latent variables can be also fitted within the IRT framework but this is out of
the scope of this paper.

3
Measurement model with direct effects
First, we model the associations among the y variables as explained by the latent
variables z and the covariates x. The covariates x and the latent variables z affect directly
the ordinal indicators. In addition, we allow the vector of covariates w to affect the vector of
latent variables z. The model and its estimation are discussed in detail in Moustaki (2003).
The probability of responding into a particular category s is defined as the difference
between two cumulative probabilities.
is (z, x) = is (z, x) i,s1 (z, x), i = 1, . . . , p; s = 1, . . . , ci (1)
where is (z, x) is the cumulative probability of a response in category s or lower of item yi ,
written as:
is (z, x) = i1 (z, x) + i2 (z, x) + + is (z, x)
The cumulative probability is (z, x) is modelled as a function of the latent variables
z and the observed covariates x:
q
X r
X
link[is (z, x)] = linkP (yi s | z, x) = s(i) ij zj + il xl ,
j=1 l=1
i = 1, . . . , p; s = 1, . . . , ci (2)
(i)
where s , ij , and il are parameters to be estimated. To simplify notation we just write
is .
The link function can be any monotonically increasing function that maps (0, 1) onto
(, ) such as the logit, the complementary log-log function, the inverse normal function,
(i)
the inverse Cauchy, or the log-log function. The parameters s are referred as cut-points
(i) (i) (i) (i)
on the logistic, probit or other scale where 1 < 2 < < ci , 0 = and
(i)
ci = +. The ij parameters can be considered as discrimination parameters or factor
loadings since they measure the effect of the latent variables z on some function of the
cumulative probability of responding up to a category of the ith item controlling for the
effect of the covariates x. In the one latent variable case the negative sign in front of the
slope parameter is used to indicate that as z increases the response on the observed item yi
is more likely to fall at the high end of the scale. The il are regression coefficients.
Plots of the response probabilities and the cumulative probabilities for different pa-
rameter values can be found in Moustaki (2003).
Let y = (y1 , y2 , . . . , yp ) represent the whole response pattern for a randomly selected
individual. The density function f (y | x) of the manifest variables y is:
Z + Z +
f (y | x) = g(y | z, x)h(z | w)dz (3)

where g(y | z, x) is the conditional density function of y given z and x and h(z | w) is the
density function of z conditional on w. The latent variables are assumed to be independent
with normal distributions. The covariates x are assumed to be fixed. The integrals in (3)
are approximated using Gauss-Hermite quadrature points. Other methods such as adaptive
quadrature, Laplace approximation or Monte Carlo methods can be used.
Under the assumption of conditional independence of y on z and x, the vector of
latent variables z and the vector of observed covariates x account for the interdependencies
among the observed ordinal variables so that when the latent variables are held fixed the
responses to the p observed variables are independent:
p
Y
g(y | z, x) = g(yi | z, x). (4)
i=1

4
For a manifest item yi the conditional probability of (yi | z, x) is given by:
ci
Y
g(yi | z, x) = is (z, x)yi,s
s=1
Yci
= (i,s i,s1 )yi,s , (5)
s=1

where yi,s = 1 if the response yi is in category s and yi,s = 0 otherwise.

Structural model
Let us assume that the latent variables z are related to a set of observed covariates w
in a simple linear form:

z = Dw + (6)

where z is q 1 vector, D is a q k matrix of regression coefficients, w is a k 1 vector


of covariates and is a q 1 vector of independent standard normal variables. It follows
that the distribution of the latent variables z conditional on the covariates w is normal with
mean Dw and variance one. The covariates w are assumed to be fixed, non-stochastic.
For a random sample of size N the log-likelihood to be maximized taken from (3) is
written
N
X
L= log f (ym | xm ) , (7)
m=1

where m refers to the m:th observation in the sample. The log-likelihood in (7) is maximized
using an E-M algorithm.
In order for the model to be identified, a necessary condition is that the covariates x
that have direct effects on the indicators must be different from the covariates w that affect
the latent variables.

THE UNDERLYING VARIABLE APPROACH


Joreskog and Goldberger (1975) discussed a multiple indicators and multiple causes
(MIMIC) model for normal indicators with a single latent variable that allows for direct and
indirect effects of covariates on the latent and manifest variables respectively. They report
that when covariates are included in the model the parameter estimates are more efficient.
Muthen (1989) discusses the MIMIC model for other types of observed indicators such as
binary and ordinal for capturing heterogeneity across groups (groups are defined through
the covariates).
The basic element of analysis within the SEM approach is either the covariance or
the correlation matrix of the indicators. The LISREL model (measurement and structural
model) is fitted on the estimated covariance or correlation matrix. More specifically, for
continuous, binary and ordinal indicators the Pearson correlations, the tetrachoric and the
polychoric correlations are estimated respectively.
In SEM the ordinal variables y are taken to be manifestations of some underlying
continuous unobserved variables y . The connection between the ordinal variable yi and
the underlying variable yi is
(i)
yi = s s1 < yi s(i) , s = 1, 2, . . . , ci , (8)

5
where
(i) (i) (i) (i)
0 = , 1 < 2 < . . . < ci 1 , c(i)
i
= + ,
are parameters called thresholds. For variable yi with ci categories, there are ci 1 threshold
parameters.
The measurement model is the classical factor analysis model extended with a new
term that contains the covariates x:
q
X r
X
yi = ij zj + bil xl + ui , i = 1, 2, . . . , p , (9)
j=1 l=1

or in matrix form
y? = z + Bx + u (10)
where ui is an error term representing a specific factor and measurement error and yi is
an unobserved continuous variable underlying the ordinal variable yi . In classical factor
analysis yi is directly observed but here it is unobserved.
The structural part of the model is

z = Dw + (11)

where z is a q 1 vector of latent variables, w is a k 1 vector of fixed covariates, D is


a q k matrix of regression coefficients and is a q 1 vector of error terms. The error
term follows a N (0, I). It is further assumed that z1 , . . . , zq , u1 , . . . , up are independent and
normally distributed with zj N (dj w, 1). Since, no information is known about the origin
and scale of the underlying variables yi the mean of yi is set to 0 and variance of yi is fixed
such that the conditional variance of yi for given x and w is 1. Other ways of fixing the
scale of the underlying variables are also possible, see Joreskog (2002).
(i)
The parameters of the model are the thresholds s , i = 1, 2, . . . , p , s = 1, 2, . . . , ci 1
and the factor loadings ij , i = 1, 2, . . . , p , j = 1, 2, . . . , q. When q > 1, the matrix
= (ij ) of order p q is determined only up to an orthogonal transformation of order
q q. The additional parameters are the elements of B and D.
The PRELIS-LISREL (PLA) approach does not specify a model for the complete
p-dimensional response pattern. Since it makes use of the data in the univariate and bi-
variate marginals only, it specifies a model only for the univariate and bivariate marginal
distributions.
The PLA approach involves two steps, one PRELIS step to estimate the thresholds
and the joint covariance matrix of y? , x and w and their asymptotic covariance matrix and
one LISREL step to estimate all the other parameters. In the LISREL step, the model can
be estimated either by robust maximum likelihood (RML) or weighted least squares (WLS),
see, e.g., Joreskog, Sorbom, Du Toit, and Du Toit (2001), Chapter 4 and Appendix A.

PRELIS Step
Let x? = (x, w). As before let y(p1) be a vector of ordinal variables with underlying
variables y? . It is assumed that

y? | x? N ( + x? , ) .

To fix the scale of y? there are two equivalent specifications: the standard parameterization
and the alternative parameterization. In the applications section we use the standard pa-
rameterization. This fixes the origin of y? such that is 0 and the unit of measurement of
y? such that is a correlation matrix, see Joreskog (2002).

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The rows of and and the diagonal elements of are estimated from the univariate
margins and the off-diagonal elements of are estimated from the bivariate margins, see
Joreskog (2002).
and ,
,
Denoting these estimates as , we have the following:
In the standard
The estimated conditional covariance matrix of y? for given x? is .
parameterization this is a correlation matrix.
The estimated unconditional covariance matrix of y? is

S 0 +
xx ,

where Sxx is the sample covariance matrix of x? .


The estimated joint unconditional covariance matrix of y? and x? is
!
xx
S 0 +

=
0 . (12)

Sxx Sxx
PRELIS also estimates the asymptotic covariance matrix of .
In addition to ,

There is no latent variable model imposed on the in (12). It is an unconstrained
covariance matrix just as a sample covariance matrix S for continuous variables. It can
therefore be used for modelling in LISREL just as if y? and x? were directly observed.

LISREL Step
The LISREL step is straightforward. Equation (10) is interpreted as a measurement
model and equation (11) is interpreted as a structural model in LISREL (see, e.g., Joreskog,
et al, 2001, Chapter 1). The covariance structure implied by these equations and their
assumptions may be fitted to by either MLR or WLS.

RELATIONSHIPS BETWEEN IRT AND PLA PARAMETERS


The parameters of the IRT and PLA approaches are not directly comparable because
of different parameterizations. For the case of covariates affecting the ordinal variables
only, i.e., the case without w-variables, the parameters of the two approaches are related as
follows:
(i)
s
s(i) = (13)
i

ij
ij = (14)
i

bil
il = (15)
i
where i is the variance of ui in (9). This extends the results of Joreskog and Moustaki
(2001) to the case with covariate effects. To compare the PLA parameters ij and bil with
the corresponding IRT parameters ij and il , we standardize the latter as follows:
? ij
ij = qPq Pr (16)
2 2
j=1 ij + l=1 il Var(xl ) +1

ij
il? = qPq Pr (17)
2 2
j=1 ij + l=1 il Var(xl ) +1

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In the case where there are covariates affecting the latent variables, i.e., where w-
variables are included in the model, no such standardization is needed because the LISREL
specification can be done in such a way that the unstandardized parameters of the two
approaches correspond.

APPLICATIONS
In this section we analyze a data set from the 1996 British Social Attitudes Survey2
(BSA). The data set has previously been analyzed with the logit IRT model in Moustaki
(2003).

First example
The data set consists of five ordinal indicators. Respondents were asked the question:
On the whole do you think it should or not be the governments responsibility to

provide a job for everyone who wants one [JobEvery]


keep prices under control [PriCon]
provide a decent standard of living for the unemployed [LivUnem]
reduce income differences between the rich and the poor [IncDiff]
provide decent housing for those who cant afford it [Housing]

The response alternatives given to the respondents were: definitely should be (DSB),
probably should be (PSB), probably not be (PNB) and definitely should not be (DSNB).
The sample size is 822.
A covariate x (available in the BSA survey) constructed to measure left to right
political identification is used, after it has been standardized, as a continuous explanatory
variable for the ordinal indicators.
There are 45 = 1024 possible response patterns but only 252 appear in the sample.
The fifteen most common response patterns are given in Table 1. We see that the response
alternative definitely should not be does not appear in any of them.
Table 2 gives the observed proportions for each category of the five ordinal indicators.
The bulk of the answers are in the first two categories especially for the indicators PriCon
and Housing.

One-Factor Model without Covariates.


We begin the analysis by fitting a one-factor model to the five indicators without
taking into account the covariate x political identification. The results of that analysis
using the IRT model with a logit link function can be found in Moustaki (2003). Here, we
consider also IRT with the probit link function and compare it with the PLA approach.
As stated in the underlying variable approach section, the PLA approach involves one
PRELIS step to estimate the thresholds and the polychoric correlations and their asymptotic
covariance matrix and one LISREL step to estimate the factor loadings. In the LISREL
step, the model can be estimated by either MLR or WLS. Details are given in Appendix 1.
There are two IRT models Probit and Logit and two PLA methods MLR and WLS.
MLR means estimating the parameters by maximum likelihood and the standard errors
by asymptotically robust methods using the asymptotic covariance matrix. WLS means
estimating the parameters by weighted least squares using the inverse of the asymptotic
covariance matrix as a weight matrix. Thus there are four approaches to be compared:
2
Social and Community Planning Research, British Social Attitudes Survey,1996, [computer file] Colch-
ester, Essex: The Data Archive [distributor], 2 December 1998. SN: 3921

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Table 1: Fifteen most common response patterns.
Frequency Response pattern
88 111 11
41 222 22
23 212 12
22 222 12
22 322 22
19 222 32
18 112 11
17 322 32
15 212 22
14 112 22
13 211 11
11 221 11
11 212 11
10 121 11
10 222 21

Table 2: Observed proportions for the ordinal indicators.


JobEvery PriCon LivUnem IncDiff Housing
Definitely should be 30.0 43.3 29.3 36.4 37.6
Probably should be 38.8 41.7 49.0 31.8 50.9
Probably not be 19.3 10.2 15.1 21.5 9.2
Definitely should not be 11.8 4.7 6.6 10.3 2.3

IRT Probit, IRT Logit, PLA MLR, PLA WLS. We give parameter estimates and standard
errors for all four approaches but for evaluation of fit and for the models with covariates we
concentrate on the comparison of IRT Logit and PLA WLS.
The standardized factor loadings with their estimated standard errors are given in
Table 3. The IRT Logit estimates are generally larger than the IRT Probit estimates.
Similarly, the PLA WLS estimates are generally larger than the PLA MLR estimates. It is
also seen that the LISREL estimates are closer to the IRT Probit estimates than to the IRT
Logit estimates, particularly for MLR. This is to be expected since the Probit link function
corresponds to the assumption of underlying normality used in the PLA approach. The
difference between IRT Probit and PLA MLR is not a difference between models but rather
a difference between estimation methods. The IRT Probit is a full information maximum
likelihood method whereas the PLA MLR is a limited information maximum likelihood
method. Table 3 also shows that the standard errors are very similar across methods.
To compare the fit of the two approaches we first compare the fit to the bivariate
contingency table of the first pair of variables, namely JobEvery and PriCon. The chi-
square residuals for IRT Logit and the PLA WLS are given in Tables 4 and 5 respectively.
For IRT Logit, there are 6 chi-square residuals greater than 4. For PLA WLS there are 3
chi-square residuals greater than 4. The sum of the chi-square residuals is 51.75 for IRT
Logit and 39.84 for PLA WLS. Thus, for this pair of variables, the fit is better for PLA
WLS than for IRT Logit. But, as will be seen, for other pair of variables, it is the other way
around.

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Table 3: Standardized Loadings

IRT PLA
Item Probit Logit MLR WLS
JobEvery .71(.03) .87(.02) .69(.03) .79(.02)
PriCon .54(.03) .76(.03) .53(.04) .62(.03)
LivUnem .78(.02) .91(.01) .79(.03) .81(.02)
IncDiff .76(.02) .90(.02) .75(.03) .77(.02)
Housing .78(.03) .92(.02) .78(.03) .82(.02)

Table 4: Chi-square residuals for JobEvery vs PriCon for IRT Logit

PriCon
JobEvery DSB PSB PNB DSNB
DSB 4.93 10.90 0.34 0.25
PSB 2.65 8.87 1.58 5.07
PNB 5.01 1.65 1.44 0.10
DSNB 0.26 4.19 0.56 4.19

We extend this analysis to the rest of the pairs and we see that there are chi-square
residuals exceeding 4 in all pairs of items and in most cases there are many. This is an
indication that the one-factor model does not fit.
Tables 6 and 7 give the total GF contributions for all pairs of variables under IRT
Logit and PLA WLS, respectively. Although, using both approaches the results are not
satisfactory, we see that the total GF contribution of IRT Logit is almost half of that of
PLA WLS. Every pair of variables has 16 possible combinations of response categories and
if the GF contribution for a pair of items is larger than 16*4=64 then the fit is considered
to be poor. We see from Table 6 that the IRT model shows a satisfactory fit for all pairs
of variables whereas from Table 7 we see that the GF contributions are smaller than 64
for 5 pairs. The striking difference is that some GF contributions are much larger for PLA
WLS than for IRT Logit. For example, for the pair JobEvery and Housing, the total GF
contribution PLA WLS is more than three times that of IRT Logit.

One-Factor Model with Covariate.


We proceed by fitting a one-factor model to the five ordinal indicators allowing for

Table 5: Chi-square residuals for JobEvery vs PriCon for PLA WLS

PriCon
JobEvery DSB PSB PNB DSNB
DSB 3.04 8.48 0.17 1.11
PSB 2.48 6.36 1.55 3.00
PNB 3.28 0.68 0.59 0.01
DSNB 4.51 3.71 0.12 0.75

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Table 6: Total GF Fits for IRT Logit

Item PriCon LivUnem IncDiff Housing


JobEvery 52.04 56.28 18.80 29.59
PriCon 50.74 24.37 31.89
LivUnem 21.29 58.77
IncDiff 24.52
Total(GF)=367.72

Table 7: Total GF Fits for PLA WLS

Item PriCon LivUnem IncDiff Housing


JobEvery 39.84 188.27 35.00 136.35
PriCon 117.15 36.40 80.01
LivUnem 49.00 88.58
IncDiff 51.75
Total(GF)=822.35

the covariate x to affect the ordinal indicators directly.


The IRT model given in (2) with a logit link is fitted with one latent variable (q = 1)
and one covariate x (r = 1).
As before, the PLA approach involves a PRELIS step and a LISREL step. The
PRELIS step estimates the joint unconditional covariance matrix of the underlying variables
and the covariate and its asymptotic covariance matrix as described in (Joreskog, 2002). The
model is fitted to the unconditional covariance matrix by MLR and WLS using a special
trick to obtain correct standard errors for the standardized solution described in Joreskog
et al. (2001), Appendix C. Details of the PLA approach is given in Appendix 1.
Table 8 gives standardized estimates of factor loadings and regression coefficients for
the one-factor model with direct effects. Standard errors of the parameter estimates are
also given. Both the loadings and the regression coefficients are larger for the IRT models,
particularly for the IRT Logit.

Table 8: Estimated standardized loadings and regression coefficients

Factor loadings Regression coefficients


Item IRT PLA IRT PLA
Logit (WLS) Logit (WLS)

i1 i1
i1 bi1
JobEvery .57(.17) .54(.03) .65(.15) .54(.02)
PriCon .46(.09) .41(.04) .58(.07) .43(.03)
LivUnem .81(.04) .73(.02) .46(.04) .40(.03)
IncDiff .58(.03) .50(.03) .69(.03) .58(.02)
Housing .82(.003) .71(.02) .46(.001) .42(.03)

We will next examine the goodness-of-fit of the IRT Logit and PLA WLS. We have

11
looked on how well the models fit the two-way margins. The covariate is continuous and
therefore takes many different values. To check the fit of the model we take three values
(with many occurrences) and we check how good the model predicts the observed frequencies
of the bivariate margins of the indicators for these values of the covariate. We select the
values such that the first one comes from the left tail of the distribution, the second from
the middle and the third from the right tail. We select the values -1.239, -0.126 and 0.987
with frequencies 44, 103 and 53 respectively.
Tables 9, 10 and 11 give the sum of the chi-square residuals for the three values of
the covariate we have chosen a-priori for the IRT Logit model with one factor and direct
covariate effect. The fit has improved much compared to the fit we get when the one-factor
model is fitted without the covariate. The model shows bad fit only for a few pairs of
categories and the total GF has decreased in comparison with the one-factor model without
the covariate in all three cases. We should note that although we give the total GF for
three values of the covariate we have checked the fit for many other values of the covariate
and they all give similar results. Most of the problematic chi-square residuals involve the
response categories DSB and DSNB.

Table 9: Total GF Fits for IRT Logit for covariate value= -1.239

Item PriCon LivUnem IncDiff Housing


JobEvery 10.53 41.28 13.12 6.96
PriCon 19.43 7.07 3.16
LivUnem 34.30 14.15
IncDiff 12.41
Total(GF)=162.42

Table 10: Total GF Fits for IRT Logit for covariate value= -0.126

Item PriCon LivUnem IncDiff Housing


JobEvery 29.48 21.64 8.72 26.59
PriCon 57.29 30.60 33.95
LivUnem 18.74 11.20
IncDiff 28.67
Total(GF)=266.88

Table 11: Total GF Fits for IRT Logit for covariate value= 0.987

Item PriCon LivUnem IncDiff Housing


JobEvery 15.38 12.55 13.16 26.54
PriCon 19.38 18.78 14.53
LivUnem 11.92 11.83
IncDiff 10.76
Total(GF)=154.84

12
Tables 12, 13 and 14 give the chi-squared residuals obtained when the factor model
is fitted on the unconditional covariance matrix with WLS for the values -1.239, -0.126 and
0.987 of the covariate, respectively. In the LISREL model, for values of the covariate near
the mean value 0 the fit has improved, whereas for values at the tails of its distribution the
fit has deteriorated. The fit has deteriorated considerably for the value -1.239.

Table 12: Total GF Fits for PLA WLS for covariate value= -1.239

Item PriCon LivUnem IncDiff Housing


JobEvery 157.56 265.71 539.85 214.31
PriCon 117.97 335.57 24.82
LivUnem 518.42 96.82
IncDiff 870.34
Total(GF)=3141.36

Table 13: Total GF Fits for PLA WLS for covariate value= -0.126

Item PriCon LivUnem IncDiff Housing


JobEvery 29.23 27.62 11.16 68.70
PriCon 141.90 49.23 69.52
LivUnem 22.22 18.34
IncDiff 40.50
Total(GF)=377.55

Table 14: Total GF Fits for PLA WLS for covariate value= 0.987

Item PriCon LivUnem IncDiff Housing


JobEvery 36.37 37.47 95.73 48.79
PriCon 39.22 111.47 37.44
LivUnem 67.02 42.86
IncDiff 60.64
Total(GF)=577.0

Second Example
The second application is also from the 1996 British Social Attitudes(BSA) Survey.
Five ordinal manifest variables were selected for the analysis. The items measure satisfaction
with the National Health Service in respondents area. The items asked are whether the
National Health Service in your area is, on the whole, satisfactory or in need of improvement.
The items asked are:

GPs appointment systems [Appointment]


Amount of time GP gives to each patient [AmountTime]
Being able to choose which GP to see [ChooseGP]

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Quality of medical treatment by GPs [Quality]
Waiting areas at GPs surgeries [WaitingArea]

The response alternatives given to the respondents are: in need of a lot of improvement
(LI), in need of some improvement (SI), satisfactory (S), and very good (VG). These are
coded 1, 2, 3, 4, respectively. Item non-response varies between 1.5%-2.5%. After we
excluded the missing values we were left with 841 respondents. Here, we are interested in
building a model where the relationships among the five indicators are explained by a latent
variable and an observed covariate political identification and the latent variable is affected
by gender and age.
There are only 205 different response patterns. The most common response patterns
are given in Table 15.

Table 15: Example 2: Most frequent response patterns.


Frequency Response pattern
149 333 33
41 233 33
30 444 44
23 223 33
22 333 43
18 333 32
16 333 34
15 232 33
14 222 22
13 323 33
13 222 33
12 332 33
12 333 23
11 444 43
11 343 44
10 233 43
10 322 33
9 344 44
9 223 23
9 334 43

The percentages for each category for each item are shown in Table 16. We see that
the majority of the responses fall in the two middle categories.

Table 16: Example 2: Frequency distribution for the observed ordinal items
Appointment AmountTime ChooseGP Quality WaitingArea
LI 11.4 6.5 6.7 3.8 3.6
SI 29.4 22.8 20.9 19.0 16.1
S 47.2 57.9 58.3 53.9 63.3
VG 12.0 12.7 14.1 23.3 17.1

14
The one-factor IRT logit model was fitted first to the five ordinal indicators. The
fit on the two-way margins was satisfactory if one looks at the chi-square residuals. There
were pair of categories that gave values greater than four but the total GF across categories
for all pair of items was not greater than 64. The LISREL model gave more or less the
same good fit except from two GF contributions. The LISREL model has almost double
GF-statistic in comparison with the IRT.
In our example the latent variable can be taken to measure overall satisfaction with
GPs. We would like to use the covariate political identification as an extra variable that
accounts for the relationships among the indicators. Political identification is measured as
an observed covariate with four categories: conservative, labour, liberal democrat (called
liberal for short) and other. We also want to measure the effect of gender and age on the
latent variable satisfaction. Age is given in four categories: 18-25, 26-44, 45-64, 65+. In
theory the covariate political identification should be a continuous variable but since it is
categorical in the data, it will be used as a set of three dichotomous dummy variables,
one for labour, one for liberal, and one for other. The category conservative is not used.
Similarly, since age is coded as an ordered categorical variable, it will be used as a set of
three dichotomous dummy variables, one for age 26-24, one for age 45-64, and one for age
65+. The age group 18-25 is not used. Thus, in the model we estimate one latent variable
Satisfaction, three x-variables Labour, Liberal, and Other, and four w-variables Female,
SecondAgeGroup, ThirdAgeGroup, FourthAgeGroup.
The details of the PLA approach is given in Appendix 2.
Table 17 gives the estimated standardized factor loadings and regression coefficients
for the IRT model and for the LISREL model.

Table 17: Standardized factor loadings and regression parameters

Factor loadings Regression coefficients


Item IRT PLA IRT PLA IRT PLA IRT PLA

i1 i1
i1 bi1 i1 bi1 i1 bi1
Labour Liberal Other
Appointment .86 .71 .39 .34 .31 .27 .20 .18
AmountTime .93 .85 .38 .36 .17 .14 .19 .15
ChooseGP .91 .77 .20 .17 -.11 -.09 .07 .07
Quality .89 .78 .34 .30 .22 .20 .39 .37
WaitingArea .80 .61 .28 .23 .01 .03 .35 .25

Table 18 gives the estimated structural parameters for the IRT model and the LISREL
model.

Table 18: Structural parameters

IRT PLA
i di
Female -.06 (.04) -.07 (.07)
26-44 .19 (.10) .18 (.12)
45-64 .49 (.11) .49 (.13)
65+ .70 (.11) .70 (.14)

15
It is very difficult to test the fit of the model when there are many covariates because
we have to test the fit of the model for combinations of the values of the covariates. Also
we need a large sample to do that.

CONCLUSIONS
We have considered a general type of model for analyzing ordinal variables with co-
variate effects and two approaches for analyzing data for such models, the item response
theory (IRT) approach and the PRELIS-LISREL (PLA) approach. We have compared these
two approaches on the basis of two examples, one involving only covariate effects directly on
the ordinal variables, andone involving covariate effects on the latent variables in addition.
On the basis of these two examples, we find that parameter estimates are often close
but the IRT models fit the data better, often much better. We also find that the models
with covariates fit better than the models without covariates, although not much better.
Both approaches have their advantages and their disadvantages. It was expected
that the IRT method would give a better fit since it uses the whole response pattern and
no loss of information occurs, whereas LISREL uses only the univariate and the bivariate
margins. LISREL requires a large sample for the estimation of the asymptotic covariance
matrix and also we do not know the effects of the violation of the bivariate normality on
the estimated parameters. On the other hand, IRT models have been developed recently
and there is no flexible software available for fitting those models. If one wants to fit a
model with many factors, one will probably have to use LISREL, Mplus or EQS. LISREL
is a very easy to use and gives much potential to the user. LISREL also allows the user
to make the latent variables dependent, fix the dependence among them or fix any other
parameter in the model. The computational burden in the IRT models increases rapidly
as the number of factors increases, whereas this is not the case with LISREL. One way to
reduce the computational burden in IRT models is to decrease the number of quadrature
points but in that case the estimates may not be precise. LISREL provides many goodness-
of-fit measures or model selection criteria, but there are not many available for IRT models
particularly not for models with covariate effects.

Appendix 1
This Appendix gives the PRELIS and LISREL syntax files used in the analysis of
Example 1.
The data file is GVRESP.DAT. This is a text (ASCII) file where the six data values
are given on one line per person and with spaces between the numbers. There are no missing
values. The covariate PolIden is the last variable. This will not be used in the first part of
the analysis.
The following PRELIS syntax file is used to compute the polychoric correlations of the
five ordinal variables and their asymptotic covariance matrix. These are saved in the files
GVRESP.PM and GVRESP.ACP, respectively.

Computing Polychoric Correlations and Asymptotic Covariance Matrix


Data Ninputvars = 5
Labels JobEvery PriCon LivUnem IncDiff Housing
Rawdata = GVRESP.DAT
Output MA=PM PM=GVRESP.PM AC=GVRESP.ACP

This gives the results reported in Table 1. The polychoric correlations are given in
Table 19.
To estimate the one-factor model with WLS we use the following SIMPLIS syntax file

16
Table 19: Matrix of Polychoric Correlations

JobEvery PriCon LivUnem IncDiff Housing


JobEvery 1.000
PriCon 0.558 1.000
LivUnem 0.505 0.314 1.000
IncDiff 0.573 0.451 0.552 1.000
Housing 0.462 0.328 0.712 0.566 1.000

Estimating the One-Factor Model


Observed Variables: JobEvery PriCon LivUnem IncDiff Housing
Correlation Matrix from File GVRESP.PM
Asymptotic Covariance Matrix from File GVRESP.ACP
Sample Size: 822
Latent Variables: Gvresp
Relationships: JobEvery - Housing = Gvresp
Method of Estimation: Weighted Least Squares
Options: LX=LOADINGS
End of Problem

This run gives the results reported in the last two columns of Table 3.
To use MLR instead of WLS just omit the line

Method of Estimation: Weighted Least Squares

The line

Options: LX=LOADINGS

is used to save the factor loadings with six decimals in the file LOADINGS. These factor
loadings are needed to compute the bivariate GF fits reported in Tables 5 and 7.
For the analysis of the five ordinal items with PolIden as covariate, we first compute
the covariance matrix of the underlying variables and the covariate. This is done with the
following PRELIS syntax file.

Computing the Unconditional Covariance Matrix


Data Ninputvars = 6
Labels
JobEvery PriCon LivUnem IncDiff Housing PolIden
Rawdata=GVRESP.DAT
Fixedvariable: PolIden
Output MA=CM CM=GVRESP.CM AC=GVRESP.ACC

This will save the unconditional covariance matrix in the file GVRESP.CM and the cor-
responding asymptotic covariance matrix in the file GVRESP.ACC.
As a byproduct this run will give the conditional correlation matrix given in Table
20. The unconditional covariance matrix is given in Table 21.
Although we have taken the covariate into account, we see that all correlations remain
highly significant. As we see from the conditional correlation matrix (see Table 20), the
covariate alone does not account for the correlations of the variables underlying the ordinal

17
Table 20: Conditional Covariance Matrix
JobEvery PriCon LivUnem IncDiff Housing
JobEvery 1.000
PriCon 0.434 1.000
(0.037)
LivUnem 0.375 0.169 1.000
(0.037) (0.043)
IncDiff 0.376 0.278 0.428 1.000
(0.038) (0.041) (0.036)
Housing 0.314 0.184 0.657 0.441 1.000
(0.040) (0.044) (0.028) (0.037)
Note. Standard errors are given in brackets

indicators. Probably the introduction of a latent variable along with the covariate will
account for the correlations among the ordinal indicators better.
The joint unconditional covariance matrix that is going to be used for estimating
factor loadings and regression coefficients under the second method is given in Table 21.

Table 21: Unconditional covariance matrix


JobEvery PriCon LivUnem IncDiff Housing PolIden
JobEvery 1.388
PriCon 0.714 1.202
LivUnem 0.645 0.364 1.188
IncDiff 0.818 0.598 0.736 1.504
Housing 0.593 0.386 0.851 0.760 1.201
PolIden 0.623 0.450 0.434 0.710 0.449 1.000

We see from Table 21 that the covariate is more related to items JobEvery and IncDiff
than the other items.
To estimate the LISREL model with the covariate we use the following LISREL syntax
file.

Estimating Standardized Solution


da ni=6 no=822
cm=gvresp.cm
ac=gvresp.acc
mo ny=6 ne=6 nk=2 ly=di,fr ph=id ps=di te=ze
fi ly(6) ga(6,1) ga(6,2) ps(6)
va 1 ly(6) ga(6,2)
co ps(1)=1-ga(1,1)**2-ga(1,2)**2
co ps(2)=1-ga(2,1)**2-ga(2,2)**2
co ps(3)=1-ga(3,1)**2-ga(3,2)**2
co ps(4)=1-ga(4,1)**2-ga(4,2)**2
co ps(5)=1-ga(5,1)**2-ga(5,2)**2
ou me=wls

This gives the WLS estimates and standard errors given in Table 8. In the output,
factor loadings are given in the first column and the regression coefficients are given in the

18
second column of the Gamma matrix. To obtain MLR estimates replace wls by ml on the
ou line.

Appendix 2
This Appendix gives the PRELIS and LISREL syntax files used in the analysis of
Example 2.
The data file is GPDATA.RAW. This is a text (ASCII) file where the 12 data values
are given on one line per person and with spaces between the numbers. There are no missing
values.
The following PRELIS syntax file is used to compute the covariance matrix for all 12
variables and the corresponding asymptotic covariance matrix. These are saved in the files
GP.CM and GP.ACC, respectively. These computations are done as explained briefly in
the underlying variable approach section. The PRELIS syntax file is (long variable names
can be used but PRELIS retains only the first eight characters):

Computing Covariance Matrix


Data Ninputvars = 12
Labels
Appointment AmountTime ChooseGP Quality WaitingArea Labour Liberal
Other Female SecondAgeGroup ThirdAgeGroup FourthAgeGroup
Rawdata = GPDATA.RAW
Clabels Appointment-WaitingArea 1=LI 2=SI 3=S 4=VG
Covariates: Labour - FourthAgeGroup
Output MA=CM CM=GP.CM AC=GP.ACC WP

The LISREL model is fitted to the covariance matrix using the following SIMPLIS
command file:

MIMIC Model with Direct Effects


Observed Variables: Appointment AmountTime ChooseGP Quality
WaitingArea Labour Liberal Other Female
SecondAgeGroup ThirdAgeGroup FourthAgeGroup
Covariance Matrix from File GP.CM
Asymptotic Covariance Matrix from File GP.ACC
Sample Size = 841
Latent Variables Satisfaction LABOUR LIBERAL OTHER
Relationships
Appointment - WaitingArea = Satisfaction LABOUR LIBERAL OTHER
Satisfaction = Female SecondAgeGroup ThirdAgeGroup FourthAgeGroup
LABOUR = 1*Labour
LIBERAL = 1*Liberal
OTHER = 1*Other
Set the Error Variance of LABOUR - OTHER to 0
Set the Error Variance of Satisfaction to 1
Path Diagram
LISREL OUTPUT: AD=OFF SO
End of Problem

A few explanations may be needed.

19
The three latent variables LABOUR, LIBERAL, and OTHER are defined to be
equal to the corresponding observed variables Labour, Liberal, and Other, respectively.
This is achieved by the four lines
LABOUR = 1*Labour
LIBERAL = 1*Liberal
OTHER = 1*Other
Set the Error Variance of LABOUR - OTHER to 0
This trick is necessary because in a LISREL model, there cannot be a path from an x-variable
directly to a y-variable if there are Eta-variables in the model.
The line
Set the Error Variance of Satisfaction to 1
This correspond to the assumption that The variance of in (11) is 1. This fixes the scale
for Satisfaction in such a way that the LISREL solution is comparable to the IRT solution.
The AD=OFF on the LISREL OUTPUT line is needed because the three latent variables
LABOUR, LIBERAL, and OTHER have zero error variances. Hence, the matrix in
LISREL is singular.
The AD=OFF on the LISREL OUTPUT line is needed because the scale for the latent
variables are not specified by fixed values in each column of y . SO tells LISREL to skip
this check.
The SIMPLIS input gives maximum likelihood estimates with standard errors esti-
mated under non-normality (RML). To obtain weighted least squares (WLS) estimates, just
put WLS on the LISREL OUTPUT line. The ML estimates are given in Tables 17 and 18.

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