Causal effect analysis in nonrandomized data with latent variables and categorical indicators: The implementation and benefits of EffectLiteR.

Abstract

Instead of using manifest proxies for a latent outcome or latent covariates in a causal effect analysis, the R package EffectLiteR facilitates a direct integration of latent variables based on structural equation models (SEM). The corresponding framework considers latent interactions and provides various effect estimates for evaluating the differential effectiveness of treatments. In addition, a user-friendly graphical interface customizes the implementation of the complex models. We aim to enable applications of EffectLiteR in more contexts, and therefore generalize the framework for incorporating latent variables measured with categorical indicators. This refers, for instance, to achievement tests in educational large-scale assessments (LSAs), which are typically constructed in the tradition of item response theory (IRT). We review different modeling strategies for incorporating latent variables from IRT models in an effect analysis (i.e., individual score estimates, plausible values, SEM for categorical indicators). The strategies differ in the handling of measurement error and, thus, have different implications for the accuracy and efficiency of causal effect estimates. We describe our extensions of EffectLiteR based on SEM for categorical indicators and illustrate the model specification step-by-step. In addition, we present a hands-on example, where we apply EffectLiteR in LSA data. The practical benefit of using latent variables in comparison to proficiency scores is of special interest in the application and discussion. (PsycInfo Database Record (c) 2024 APA, all rights reserved).