The effect of measurement error on hypothesis testing in small sample structural equation modeling: A comparison of various estimation approaches

Researchers seeking valid statistical inference in the presence of measurement error often apply approaches that ignore measurement error. This may result in biased estimates, inflated type I error rates, diminished power, and therefore, increases the risk of drawing erroneous conclusions. However, current advice on accounting for random measurement error is limited to large samples and traditional linear models. This article aims to address this gap for small samples and recent estimation approaches in structural equation modeling. Our results show substantial type I error rate inflation for approaches that ignore measurement error when the model contains correlated latent predictors.