Using Parcels to Convert Path Analysis Models Into Latent Variable Models

The biasing effects of measurement error in path analysis models can be overcome by the use of latent variable models. In cases where path analysis is used in practice, it is often possible to use parcels as indicators of a latent variable. The purpose of the current study was to compare latent variable models in which parcels were used as indicators of the latent variables, path analysis models of the aggregated variables, and models in which reliability estimates were used to correct for measurement error in path analysis models. Results showed that point estimates of path coefficients were smallest for the path analysis models and largest for the latent variable models. It is concluded that, whenever possible, it is better to use a latent variable model in which parcels are used as indicators than a path analysis model using total scale scores.