Model fit evaluation in multilevel structural equation models

Assessing goodness of model fit is one of the key questions in structural equation modeling (SEM). Goodness of fit is the extent to which the hypothesized model reproduces the multivariate structure underlying the set of variables. During the earlier development of multilevel structural equation models, the "standard" approach was to evaluate the goodness of fit for the entire model across all levels simultaneously. The model fit statistics produced by the standard approach have a potential problem in detecting lack of fit in the higher-level model for which the effective sample size is much smaller. Also when the standard approach results in poor model fit, it is not clear at which level the model does not fit well. This article reviews two alternative approaches that have been proposed to overcome the limitations of the standard approach. One is a two-step procedure which first produces estimates of saturated covariance matrices at each level and then performs single-level analysis at each level with the estimated covariance matrices as input (Yuan and Bentler, 2007). The other level-specific approach utilizes partially saturated models to obtain test statistics and fit indices for each level separately (Ryu and West, 2009). Simulation studies (e.g., Yuan and Bentler, 2007; Ryu and West, 2009) have consistently shown that both alternative approaches performed well in detecting lack of fit at any level, whereas the standard approach failed to detect lack of fit at the higher level. It is recommended that the alternative approaches are used to assess the model fit in multilevel structural equation model. Advantages and disadvantages of the two alternative approaches are discussed. The alternative approaches are demonstrated in an empirical example.