Latent variable interaction and quadratic effect estimation: A two-step technique using structural equation analysis.

The author proposes an alternative estimation technique for latent variable interactions and quadraties. Available techniques for specifying these variables in structural equation models require adding variables or constraint equations that can produce specification tedium and errors or estimation difficulties. The proposed technique avoids these difficulties and may be useful for EQS, LISREL 7, and LISREL 8 users. First, measurement parameters for indicator Ioadings and errors of linear latent variables are estimated in a measurement model that excludes the interaction and quadratic variables. Next, these estimates are used to calculate values for the indicator loadings and error variances ofthe interaction and quadratic latent variables. Then, these calculated values are specified as constants in the structural model containing the interaction and quadratic variables. Interaction and quadratic effects are routinely reported for categorical independent variables (i.e., in analysis of variance) frequently to aid in the interpretation of significant main effects. However, interaction and quadratic effects are less frequently reported for continuous independent variables.