Correction for Item Response Theory Latent Trait Measurement Error in Linear Mixed Effects Models

When latent variables are used as outcomes in regression analysis, a common approach that is used to solve the ignored measurement error issue is to take a multilevel perspective on item response modeling (IRT). Although recent computational advancement allows efficient and accurate estimation of multilevel IRT models, we argue that a two-stage divide-and-conquer strategy still has its unique advantages. Within the two-stage framework, three methods that take into account heteroscedastic measurement errors of the dependent variable in stage II analysis are introduced; they are the closed-form marginal MLE, the expectation maximization algorithm, and the moment estimation method. They are compared to the naive two-stage estimation and the one-stage MCMC estimation. A simulation study is conducted to compare the five methods in terms of model parameter recovery and their standard error estimation. The pros and cons of each method are also discussed to provide guidelines for practitioners. Finally, a real data example is given to illustrate the applications of various methods using the National Educational Longitudinal Survey data (NELS 88).