11 Chapter 7 Analyzing The Moderating Variable

A Handbook on SEM
Zainudin Awang - Universiti Sultan Zainal Abidin
CHAPTER 7
ANALYZING THE MODERATING

VARIABLE IN A MODEL
Researches in business, social sciences and other disciplines involve theories concerning moderating
variables. Thus, researchers in these areas should know how to model the moderators and analyse
them in their work.
Moderating variable is the variable that moderates the effects of an independent variable on
its dependent variable. The social science researchers, in particular, define moderator as the variable
that interfere in the relationship between an independent variable and its corresponding dependent
variable. For illustration, let M be the moderator variable in the X-Y relationship. Then the
moderation role of M is to alter the effects of X on Y.
Before introducing a moderator into the model, the effects of independent variable X on its
dependent variable Y must exist and significant. Thus, when a moderator M enters the model, the
causal effects would change due to some interaction effect between independent variable X and
moderator variable M just entered. As a result, the effects of X on Y could either increase or
decrease. In other words, the effect of independent variable on its dependent variable would depend
on the level of moderator variable.
7.1
THE SCHEMATIC DIAGRAM FOR MODERATING

VARIABLE IN A MODEL
Example 1:
Let X = the amount of environmental news in the media educating the public concerning the safe and
clean environment. The campaign intends to make the public aware of environmental degradation and
that they should help the environment by switching to environmental friendly products. Let Y = the
respondents intention to purchase green products, and let M = their level of education as a
moderator. If the effect of environmental campaign (X) in influencing the public to purchase green
products (Y) is more visible among higher educated consumers compared to lower educated
consumers, then we can say that education (M) is the variable that moderates the relationship between
Environmental Awareness Campaign and Intention to Purchase Green Products by the public.
Figure 1 illustrates the position of moderating variable M in the in the X-Y relationship.
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Environmental
Awareness
Campaign
Intention to
Purchase
Green Products
Independent Variable
Moderator Variable
Level of
Education
Dependent Variable
Figure 1: The schematic diagram showing the independent variable, dependent variable and a
moderator in a model
Example 2:
Let X = monetary incentives, Y = work motivation, and M = age of workers. If the effects of
monetary incentives (X) on work motivation (Y) are more visible on certain age groups (M), then one
could claim that age of workers (M) moderates the relationship between monetary incentives (X) and
their work motivation (Y). Figure 2 illustrates the position of variable M in the X-Y relationship.
Monetary
Incentives
Motivation
to Work
Age Group
Figure 2: The representation of Age as moderating variable in the relationship between Monetary
Incentives and Work Motivation
Example 3:
Let X = the corporate reputation of manufacturers, Y = customers brand loyalty, and M = the
customers socio-economic status. If the effects of manufacturers corporate reputation (X) on
customers brand loyalty (Y) are depending on their level of socioeconomic status (M), then one
could claim that respondents socioeconomic status moderates the effects of the firms corporate
reputation (X) on consumers brand loyalty (Y). Figure 3 illustrates the position of socioeconomic
status (M) in the corporate reputation and brand loyalty relationship.
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Manufacturer's
Corporate
Reputation
Customer
Loyalty
on Product
Socio
Economic
Status
Figure 3: The representation of Socio-Economic Status as moderating variable in the Corporate

Reputation Brand Loyalty relationship
7.2
MODELING THE INTERACTION EFFECTS OF A MODERATOR

FOR THE OBSERVED VARIABLE
As has been said earlier, although moderation implies a weakening of a causal effect, a moderator can
also enhance the causal effect. Remember: The term interaction and moderation carries the same
meaning. The interaction between independent variable and moderator in the model could decrease or
increase the effects on dependent variable.
A key part of moderation is the measurement of causal effect of independent variable X on
dependent variable Y for different level of moderator variable M. In statistics, the effect of X on Y
for a fixed value of M is referred as the simple effect of independent variable on its dependent
variable. Let X is an independent variable and Y is a dependent variable. The simple regression
equation will be:
Y = 0 + 1X + e
Let assume that the above regression relation does exists and statistically significant. When
the moderator variable M enters the model, the moderation effect of M is modeled in the regression
equation as follows:
Y = 0 + 1X + 2M + 3XM + e
The regression coefficient 3 measures the interaction effect between independent variable X
and moderating variable M. Note that the regression coefficient 1 measures the simple effects of X
when the value of M = 0 (no interaction effects involved). Then, the test of moderation is
operationalized by the product term XM (the multiplication between independent variable X and
moderator variable M).
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In order to test the moderation in a model, one needs to test 3 (the coefficient of interaction term
XM). If 3 is significant, then one could conclude that moderator variable M moderates the
relationship between X and Y.
Testing moderator for observed variables
Testing moderation for observed variables involve the Ordinary Least Squares (OLS) regression in
which the dependent variable, Y, is regressed on the interaction term XM and the main effects X and
M. If both variables X and M are continuous, the researcher needs to create the mean-centred value
for X and M where Xi = (Xi mean of X) and Mi = (Mi mean of M). Thus, the new variable X and
M has a mean of zero. Now XM = (Xi) * (Mi). Variable Y does not have to be cantered.
7.3
SCALE OF MEASUREMENT FOR A MODERATING VARIABLE
The researcher should employ the interval or ratio scale for measuring both independent and
dependent variables since the analysis involves parametric methods. As for the moderator variable, it
can be measured using any scale (nominal, ordinal, interval, and ratio). Among the popularly used
moderating variables in research are the respondents demographic characteristics (nominal) and the
level of treatment variable applied (ordinal).
Both the Ordinary Least Square regression (OLS) and Structural Equation Modeling (SEM)
could be employed if the dependent variable (Y) is measured using the interval or ratio scale.
However, if the dependent variable is measured using a dichotomous scale (outcome is either yes or
no), then the logistic regression should be employed.
7.4
MODELING THE MODERATING EFFECTS FOR OBSERVED

VARIABLES
Having all variables and data in hand, the next thing the researcher needs to know is how to
analyze the moderator and prove that M is actually moderating the relationship between X and Y. In
addition to the variable X, M, and Y, the researcher needs to create a new variable namely XM from
the product of X multiply M. Thus, the variables involve will be X, Y, M, and XM. The information
can be modeled in the following regression equation:
Y = 0 + 1X + 2M + 3XM + e1
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Figure 4 illustrates how the regression equation is modeled in AMOS graphic.
X
e1
1
XM
Figure 4: The modelling of moderating variable M in AMOS for observed variables
As shown in Figure 4, three hypotheses testing for path analysis is required namely:
1. The X-Y relationship (testing for 1) we indicate as Hypothesis 1
2. The M-Y relationship (testing for 2) we indicate as Hypothesis 2
3. The XM-Y relationship (testing for 3) we indicate as Hypothesis 3
The moderation effects of moderator variable M in the model occurs if Hypothesis 3 (3) is
significant and Hypothesis 2 (2)is not significant. As for Hypothesis 1 (1), there are two
possibilities that could occur:
1. If Hypothesis 1 is not significant then the complete moderation occurs
2. If Hypothesis 1 is significant then the partial moderation occurs.
7.5 ANALYZING THE MODERATING EFFECTS FOR OBSERVED

VARIABLES
We shall go through some practical examples in order to enhance our understanding concerning
the concept of moderation.
Suppose the researcher is interested to assess the moderation effects of age of workers (M) in the
relationship between the monetary incentives given to them (X) and their monthly productivity
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(Y). The AMOS model illustrating the researchers theoretical argument is given in Figure 5. All
variables in the model are directly observed, thus the rectangles are employed instead of ellipses.
Incentives
e1
1
Age
Productivity
Incentive*Age
Figure 5: The model in AMOS Graphic for testing Age as Moderator
The measurement of variables involved in the model.

Independent variable = Monetary Incentives (can be interval or ratio scale)
Dependent variable = Monthly Productivity (can be interval or ratio scale)
Moderating variable = Age of workers (can be interval or ratio scale)
The corresponding AMOS output for the above model where all variables involved are interval or
ratio is given in Figure 6
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Incentives
.60
e1
.59
.24
1
.49
Age
.66
.89
Productivity
-.88
.68
.20
Incentive*Age
Figure 6: The AMOS output showing the regression coefficients, variance, and covariance
The hypotheses testing required in analyzing a moderator in Figure 6

Hypothesis 1: The Monetary Incentives given to workers has significant effects on their
monthly productivity
Table 1: Testing the causal effects of Incentives on Productivity
Estimate
S.E.
C.R.
0.59
0.068
8.636
Productivity <--- Incentives
P
0.001
Result
Significant
In this case, Hypothesis 1: the hypothesis that the causal effects of incentives on productivity are
significant is supported.
Hypothesis 2: The Workers age level has significant effects on their productivity
Table 2: Testing the causal effects of Age on Productivity
Estimate
S.E.
C.R.
0.89
0.61
1.451
Productivity <--Age
Result
0.072
Not Significant
In this case, the hypothesis that the effects of age on productivity are significant is not supported.
Hypothesis 3: The workers age moderates the relationship between incentives and productivity
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Table 3: Testing the Moderating Effects of Incentives*Age on Productivity
Estimate
S.E.
C.R.
P
Incentive*Age
Productivity
-0.88
0.186
-4.742
Result
Significant
0.001
In this case, the hypothesis that the moderating effects of workers age (M) on relationship
between incentives (X) and their productivity (Y) are significant is supported.
The type of moderation that occurs in this case is partial moderation since the hypothesis for
the main effect is still significant after the moderator enters the model.
Note: The regression coefficient of product term (incentive*age) on productivity is negative, which
indicates that the moderating variable (age) weakens the causal effects of monetary incentives (X) on
monthly productivity (Y). In other words, the increase in workers age would give negative effects on
the firms productivity.
7.6 MODELING THE MODERATING EFFECTS FOR LATENT

CONSTRUCTS
Analyzing the moderating effects for the model with latent constructs is very complicated. The
normal modeling procedure using interaction terms is not practical with latent constructs since it
would cause problems with model convergence as well as distortion of standard errors. In the end, it
resulted in model misfit and the procedure stops.
Figure 7 illustrates how the moderator is modeled when analyzing the model consisting latent constructs.
e1
e2
e3
X11
X12
e4
1
X13
e5
1
X14
e6
e7
X15
Y1
e8
1
Y2
Y3
X1
e9
e10
1
Y4
1
Y5
1
e11
Moderator
Figure 7: Modeling the moderator variable in the path between X1 and Y
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Alternatively, the Multi-Group CFA has been suggested as an alternative method for assessing
the effect of moderator variable in the model. The researcher only needs to identify the path of
interest where the moderator variable is to be assessed. This particular path would be constrained
with parameter = 1 and the model is termed as the constrained model. The procedure will estimate
two models separately. One is the constrained model while the other one is the unconstrained
model. The step by step process for Multi-Group CFA is discussed.
7.7
ANALYZING THE MODERATOR FOR LATENT CONSTRUCTS:

THE MULTI-GROUP CFA
There are few steps involved in performing Multi-Group CFA:

1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
Split data into two groups based on the moderator variable to be tested.
Save data into two separate files: Name the files as dataset 1 and dataset 2.
Select the path of interest in the model to test the moderator variable.
Develop two separate AMOS models: Rename as model 1 and model 2.
In Model 1, constraint the parameter in the path of interest to be equal to 1.
Name model 1 as the constrained model.
In model 2, do not constrain the relationship in the path of interest.
Name model 2 as the unconstrained model.
Use dataset 1: Estimate the constrained model
Use the same dataset 1: Estimate the unconstrained model
Obtain the difference in Chi-Square value between the constrained and the unconstrained
model. If the value differs by more than 3.84, then the moderation occurs in that path.
12)
13)
14)
15)
Repeat the same procedure using dataset 2.

Use dataset 2: Estimate the constrained model
Use the same dataset 2: Estimate the unconstrained model
Obtain the difference in Chi-Square value between the constrained and the unconstrained
model. If the value differs by more than 3.84, then the moderation occurs in that path.
Example: Suppose we are modeling the effect of X1 and X2 on Y (Figure 8). One of the objectives for
this research is to examine the moderation effect of a variable namely education in the relationship
path between X1 and Y.
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e1
e3
e4
e5
X11
X13
X14
X15
Path of interest to
test the
Moderator
e14
X1
Y1
e10
Y2
e11
Y
Y3
Y4
e12
1
e13
X2
X24
1
e9
X23
X22
X21
e8
e7
e6
Figure 8: The path where the moderator Education is to be examined.
The path of interest where the moderation tests is to be carried out is shown in Figure 8. First of
all, the data is sorted in ascending order based on respondents level of education. Then the data is split
and save into two separate data files. Data 1 is renamed as low education group, while data 2 is
renamed as high education group.
Secondly, put a parameter constraint on the selected path to be equal to 1 as shown in Figure 9. This
model is renamed as the constrained model.
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e1
e3
e4
e5
X11
X13
X14
X15
Constrained
e14
X1
constrained
1
Y1
e10
Y2
e11
Y
Y3
Y4
e12
1
e13
X2
1
X24
1
e9
X23
X22
X21
e8
e7
e6
Figure 9: The Constrained Model: The parameter in the path of interest (X1 to Y) is constrained to 1.
Thirdly, using the same model, remove the parameter constraint in the path as shown in Figure
10. This model is renamed as the unconstrained model. Now the researcher has two models to be
assessed namely the constrained and the unconstrained model.
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e1
e3
e4
e5
X11
X13
X14
X15
Unconstrained
1
e14
X1
Y1
e10
Y2
e11
Y
Y3
Y4
e12
1
e13
X2
X24
1
e9
X23
X22
X21
e8
e7
e6
Figure 10: The Unconstrained Model: The coefficient in the path (X1 to Y) is not constrained.
Next, obtain the estimate for both the constrained model and also the unconstrained model
using the first dataset (low education group). The output is presented in Figure 11 for the constrained
model and in Figure 12 for the unconstrained model.
The procedure for testing moderation is carried out as shown in Table 1a.
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.87
.19
e1
.24
e3
.25
e4
e5
X11
X13
X14
X15
1.78
1.00
1.65
.73
1.76
e14
X1
Y1
1 1.00
1.00
.39
.09
Y2
.72
1
Y4
1.01
.83
X24
X23
1
1.41
e9
X22
1
.96
e8
1
.04
e7
.12
e13
Fitness Indexes
1.ChiSq = 107.979
2.df = 50
3.ChiSq/df = 2.160
4.GFI = .905
5.AGFI = .851
6.CFI = .970
7.RMSEA = .086
1.00
.62
e12
1.05
.07
X2
e11
.20
1.09
Y3
1.31
e10
.04
1.02
.43
X21
1
.18
e6
.51
Figure 11: Low Education Group: The output for the constrained model.
The Chi-Square Value and DF for the constrained model

Model
Default model
Saturated model
Independence model
NPAR
CMIN
DF
CMIN/DF
28
78
12
107.979
0.000
2000.617
50
0
66
0.000
2.160
0.000
30.312
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.19
e1
.24
e3
.25
e4
e5
X11
X13
X14
X15
1.55
1.00
1.44
.72
1.54
e14
X1
Y1
1 1.00
.69
.51
.09
Y2
.72
1
Y4
1.00
.62
1.01
.83
X24
X23
1
1.41
e9
1
.96
e8
X22
1
.05
e7
X21
e12
1.06
.14
X2
e11
.20
1.09
Y3
1.31
e10
.04
1.03
.49
.12
e13
Fitness Indexes
1.ChiSq = 104.520
2.df = 49
3.ChiSq/df = 2.133
4.GFI = .906
5.AGFI = .851
6.CFI = .971
7.RMSEA = .085
1
.18
e6
.51
Figure 12: Low Education Group: The output of the unconstrained model.
The Chi-Square Value and DF for the unconstrained model
Model
Default model
Saturated model
Independence model
NPAR
29
78
12
CMIN
104.520
0.000
2000.617
DF
49
0
66
P
0.000
CMIN/DF
2.133
0.000
30.312
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Table 1a: The Moderation Test for Low Education group data
Constrained
Unconstrained
Chi-Square
Result on
Result on
Model
Model
Difference
Moderation
Hypothesis
107.979
104.520
3.459
Not Significant
Not Supported
DF
50
49
GFI
0.905
0.906
AGFI
0.851
0.851
CFI
0.970
0.971
RMSEA
0.086
0.085
CMIN/DF
2.160
2.133
Chi-Square
The hypothesis statement:

Ha: Respondents education moderates the relationship between X1 and Y
Not Supported
***The moderation test is not significant since the difference in Chi-Square value between the
constrained and unconstrained model is less than 3.84.
The difference in Chi-Square value is 3.459 (107.979 - 104.520), while the difference in Degrees of
Freedom is 50 49 = 1. For the test to be significant, the difference in Chi-Square value must be
higher than the value of Chi-Square with 1 degree of Freedom, which is 3.84
The procedure for performing the test of moderation for the same variable (education) using another
dataset (high education group) is carried out in Table 1b. The test of hypothesis should the produce
the same result.
If the result differs, then go back to the original data and redefine the levels of education. Regroup the
data based on the new definition for low education level and high education level. Repeat the same
procedure again.
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.92
.27
e1
.29
e3
.14
e4
e5
X11
X13
X14
X15
1.61
1.73
.79
1.93
1.00
e14
X1
Y1
1.04
.34
Y2
.97
1
1.17
1.38
e9
e8
e12
.15
1
e13
1.07
X2
X23
1.21
Y4
X24
e11 .06
.17
1.08
.79
.17
1.09
Y3
.66
e10 .12
1 1.00
1.00
.32
X22
1
.12
e7
Fitness Indexes
1.ChiSq = 75.987
2.df = 50
3.ChiSq/df = 1.520
4.GFI = .928
5.AGFI = .888
6.CFI = .985
7.RMSEA = .058
1.00
X21
1
.20
e6
.40
Figure 13: High Education Group: The output for the constrained model.
The Chi-Square value and DF for the constrained model

NPAR
CMIN
DF
CMIN/DF
Default model
Saturated model
28
78
75.987
0.000
50
0
0.010
1.520
Independence model
12
1760.721
66
0.000
26.678
Model
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.91
.27
e1
.29
e3
.14
e4
e5
X11
X13
X14
X15
1.41
1.53
.78
1.70
1.00
e14
X1
Y1
1.04
.39
Y2
.15
1.21
1
Y4
.98
X23
1
1.17
1.38
e9
e8
e13
1.07
X2
X24
e12
.23
1.08
.79
e11 .06
.17
1.10
Y3
.66
e10 .12
1 1.00
.70
.42
X22
1
.12
e7
1.00
X21
Fitness Indexes
1.ChiSq = 73.575
2.df = 49
3.ChiSq/df = 1.502
4.GFI = .930
5.AGFI = .888
6.CFI = .985
7.RMSEA = .057
1
.20
e6
.40
Figure 14: High Education Group: The output for the unconstrained model.
Model
The Chi-Square Value and DF for the unconstrained model

NPAR
P
CMIN
DF
Default model
29
73.575
49
Saturated model
78
0.000
Independence model
12
1760.721
66
CMIN/DF
0.013
1.502
0.000
26.678
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Table 1b: The Moderation Test for High Education level
Chi-Square
DF
GFI
AGFI
CFI
RMSEA
Chisq/df
Constrained
Model
Unconstrained
Model
75.987
73.575
50
0.928
0.888
0.985
0.058
1.520
49
0.930
0.888
0.985
0.057
1.502
Chi-Square
Difference
2.412
Result on
Moderation
Not Significant
Result on
Hypothesis
Not Supported

Not Supported
***The moderation test is not significant since the difference in Chi-Square value between the
constrained and unconstrained model is less than 3.84. The difference in Chi-Square value is 2.412
(75.987 - 73.575), while the difference in Degrees of Freedom is 50 49 = 1. For the test to be
significant, the difference in Chi-Square value must be higher than the value of Chi-Square with 1
degree of Freedom, which is 3.84
The test of hypothesis for moderation that has been carried out found that the
moderator variable respondents education does not moderate the causal effects of X1 on Y.
Suppose that the researcher has another objective - to determine whether the same moderator
variable (respondents education) moderates another causal path namely X2 to Y. Now the selected
path has changed to the new path (X2 to Y). To test the moderation effect of respondents education
for the new path, the researcher needs to repeat the same procedure that has been explained earlier.
The analysis and moderation test for the new path is explained in the following example.
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e1
e3
e4
e5
X11
X13
X14
X15
e14
X1
Y1
e10
Y2
e11
Y
Y3
e12
Y4
e13
X2
1
X24
1
e9
X23
X22
X21
e8
e7
e6
Constrained
constrained
Figure 15: The Constrained Model: The parameter in the selected path (X2 to Y) is constrained to 1.
Recall: The parameter constraint is fixed in the path where the moderation effect will be
examined, and the data is split based on the moderator variable of interest.
In the above example, the path of interest is X2 to Y and the moderator variable to be tested is
respondents education. Lets begin the analysis using the low education group.
The output for the constrained and unconstrained models is presented in Figure 16 and Figure
17 respectively. The test of moderation is carried out in Table 2a.
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.18
e1
.26
e3
.24
e4
e5
X11
X13
X14
X15
1.57
1.00
1.44
1.21
1.56
e14
X1
Y1
1 1.00
-.10
.51
.09
Y2
.73
Y4
1.08
.91
X24
X23
1
.94
1.39
e9
X22
e8
1
.06
e7
.12
e13
Fitness Indexes
1.ChiSq = 185.363
2.df = 50
3.ChiSq/df = 3.707
4.GFI = .848
5.AGFI = .763
6.CFI = .930
7.RMSEA = .131
1.00
.69
e12
1.02
1.00
X2
e11
.20
1.06
Y3
1.12
e10
.05
.99
.46
X21
1
.20
e6
.49
Figure 16: Low Education Group: The output for Constrained Model.

Model
NPAR
CMIN
DF
CMIN/DF
Default model
28
185.363
50
0.000
3.707
Saturated model
78
0.000
Independence model
12
2000.617
66
0.000
30.312
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.19
e1
.24
e3
.25
e4
e5
X11
X13
X14
X15
1.55
1.00
1.44
.72
1.54
e14
X1
Y1
1 1.00
.69
.51
.09
Y2
.72
1
Y4
1.01
.83
X24
X23
1
.96
1.41
e9
X22
e8
1
.05
e7
.12
e13
Fitness Indexes
1.ChiSq = 104.520
2.df = 49
3.ChiSq/df = 2.133
4.GFI = .906
5.AGFI = .851
6.CFI = .971
7.RMSEA = .085
1.00
.62
e12
1.06
.14
X2
e11
.20
1.09
Y3
1.31
e10
.04
1.03
.49
X21
1
.18
e6
.51
Figure 17: Low Education Group: The output for Unconstrained Model.
The Chi-Square Value and DF for the Unconstrained Model

Model
NPAR
CMIN
DF
CMIN/DF
Default model
29
104.520
49
0.000
2.133
Saturated model
78
0.000
Independence model
12
2000.617
66
0.000
30.312
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A Handbook on SEM
Table 2a: The Moderation Test for Low Education Group Data
Constrained
Unconstrained
Chi-Square
Result on
Result on
Model
Model
Difference
Moderation
Hypothesis
185.363
104.520
80.843
Significant
Supported
DF
50
49
GFI
0.848
0.906
AGFI
0.763
0.857
CFI
0.930
0.971
RMSEA
0.131
0.085
Chisq/df
3.707
2.133
Chi-Square

Supported
***The moderation is significant since the difference in Chi-Square value between the
constrained and unconstrained model is more than 3.84. The difference in Chi-Square value is
(185.363 104.520) = 80.843, while the difference in Degrees of Freedom is 50 49 = 1. For the test
to be significant, the difference in Chi-Square value must be higher than the value of Chi-Square with
1 degree of Freedom, which is 3.84
The test of hypothesis for moderation that has been carried out found that the moderator
variable respondents education does moderate the causal effects of X2 on Y.
The procedure for performing the test of moderation for the same variable (education) using
another data-set (data 2) is carried out in Table 2b. The test of hypothesis is expected to produce the
same result that the respondents level of education does moderate the causal effects of X2 on Y.
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A Handbook on SEM
.91
.26
e1
.30
e3
.14
e4
e5
X11
X13
X14
X15
1.40
1.53
1.04
1.69
1.00
e14
X1
Y1
1.00
.36
Y2
.15
1.18
1
Y4
1.10
X23
1
1.15
1.36
e9
e8
e13
1.06
X2
X24
e12
1.00
.85
.90
e11 .06
.18
1.06
Y3
.75
e10 .12
1 1.00
.06
.42
X22
1
.11
e7
1.00
X21
Fitness Indexes
1.ChiSq = 123.410
2.df = 50
3.ChiSq/df = 2.468
4.GFI = .884
5.AGFI = .819
6.CFI = .957
7.RMSEA = .097
1
.26
e6
.39
Figure 18: High Education Group: The output for Constrained Model.

Model
NPAR
CMIN
DF
CMIN/DF
Default model
28
123.410
50
0.000
2.468
Saturated model
78
0.000
Independence model
12
1760.721
66
0.000
26.678
139
A Handbook on SEM
.91
.27
e1
.29
e3
.14
e4
e5
X11
X13
X14
X15
1.41
1.53
.78
1.70
1.00
e14
X1
Y1
1.04
.39
Y2
.15
1.21
1
Y4
.98
X23
e9
X22
1
1.17
1.38
e8
e13
1.07
X2
X24
e12
.23
1.08
.79
e11 .06
.17
1.10
Y3
.66
e10 .12
1 1.00
.70
.42
1
.12
e7
1.00
X21
Fitness Indexes
1.ChiSq = 73.575
2.df = 49
3.ChiSq/df = 1.502
4.GFI = .930
5.AGFI = .888
6.CFI = .985
7.RMSEA = .057
1
.20
e6
.40
Figure 19: High Education Group: The output for Unconstrained Model.
The Chi-Square Value and DF for the Unconstrained Model

Model
NPAR
CMIN
DF
CMIN/DF
Default model
29
73.575
49
0.013
1.502
Saturated model
78
0.000
Independence model
12
1760.721
66
0.000
26.678
140
A Handbook on SEM
Table 2b: The Moderation Test for High Education Group Data
Constrained
Unconstrained
Chi-Square
Result on
Result on
Model
Model
Difference
Moderation
Hypothesis
123.410
73.575
49.835
Significant
Supported
DF
50
49
GFI
0.884
0.930
AGFI
0.819
0.888
CFI
0.957
0.985
RMSEA
0.097
0.057
Chisq/df
2.468
1.502
Chi-Square

Supported
***The moderation test is significant since the Chi-Square difference between the constrained
and unconstrained model is greater than 3.84. Recall: The Chi-Square value with 1 degree of
freedom is 3.84.
Referring to Table 2b: All fitness indexes for the unconstrained model is significantly better
(smaller Chi-Square) than the constrained model, indicating that the two groups coefficient differ.
The results show support for the hypothesis that education moderates the relationship
between latent exogenous construct X2 and its corresponding latent endogenous construct Y.
Once the moderation effect is established, the study might be interested to determine in which
group (low education or high education) the relationship between X2 on Y is more pronounced?
To address this particular research question, the researcher needs to run the unconstrained
model separately using both datasets (Low Education and High Education). Compare the
standardized parameter estimates and its significance for both datasets. The result is presented in
Figure 21 for dataset 1 (low education), and Figure 22 for dataset 2 (high education).
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A Handbook on SEM
7.8
COMPARING THE GROUP EFFECTS FOR A MODERATOR

VARIABLE
Suppose one has the following research question to address: In which group (low education or higher
education), the effect of moderator variable (education) is more pronounced? To address this RQ, the
researcher needs to obtain the standardized estimate for the path of interest for both datasets. The
procedure is demonstrated in Figure 20 and Figure 21.
e1
e3
.37
e4
e5
.87
X11
X13
.81
X14
.83
X15
.93
.61
.90
.91
e14
X1
.92
Y1
.96
.48
.97
.98
.60
e10
Y2
e11
.86
.93
Y3
.15
.34
.79
e12
.63
Y4
X2
.94
.51
.98
.70
.26
.49
.97
.88
X24
X23
X22
X21
e9
e8
e7
e6
Fitness Indexes
1.ChiSq = 104.520
2.df = 49
3.ChiSq/df = 2.133
4.GFI = .906
5.AGFI = .851
6.CFI = .971
7.RMSEA = .085
.31
e13
Low Education Group

Slope = 0.15, Not
Significant
.44
Figure 20: The Standardized Beta Estimate for Low Education Group in Path X2 to Y
The Effect of X2 on Y is Not Significant for Low Education Group
<---
X2
Standardized beta
Estimate
0.15
P
0.077
Result
Not Significant at 0.05
142
A Handbook on SEM
e1
e3
.32
e4
.78
X11
X13
e5
.74
.90
X14
X15
.86
.88
.95
.56
e14
X1
.90
Y1
.95
.42
.96
.98
.58
e10
Y2
e11
.89
.94
Y3
.22
.34
e12
.62
.79
Y4
X2
.50
.61
.95
.25
.37
.92
.89
.84
X24
X23
X22
X21
e9
e8
e7
e6
Fitness Indexes
1.ChiSq = 73.575
2.df = 49
3.ChiSq/df = 1.502
4.GFI = .930
5.AGFI = .888
6.CFI = .985
7.RMSEA = .057
.35
e13
High Education Group

Slope = 0.22,
Significant
.32
Figure 21: The Standardized Beta Estimate for High Education Group in Path X2 to Y
The Effect of X2 on Y is Significant for High Education Group
<---
X2
Standardized beta
Estimate
0.22
P
0.011
Result
Significant at 0.05
***The standardized parameter estimate for High Education Group is 0.22 while the same
estimate for Low Education Group is 0.15. Thus, one can conclude that the effect of X2 on Y is
more pronounced in Higher Education Group compared to Low Education Group.
Now the researcher wants to determine the type of moderation that occurs in the X2 and Y
relationship. The results show that the type of moderation is full moderation since the standardized
estimate for High Education is significant while the standardize estimate for Low Education is not
significant. If both estimates are significant then partial moderation occurs.
143

11 Chapter 7 Analyzing The Moderating Variable

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A Handbook on SEM

Zainudin Awang - Universiti Sultan Zainal Abidin

ANALYZING THE MODERATING

THE SCHEMATIC DIAGRAM FOR MODERATING

Figure 3: The representation of Socio-Economic Status as moderating variable in the Corporate

MODELING THE INTERACTION EFFECTS OF A MODERATOR

SCALE OF MEASUREMENT FOR A MODERATING VARIABLE

MODELING THE MODERATING EFFECTS FOR OBSERVED

Figure 4 illustrates how the regression equation is modeled in AMOS graphic.

7.5 ANALYZING THE MODERATING EFFECTS FOR OBSERVED

Figure 5: The model in AMOS Graphic for testing Age as Moderator

The measurement of variables involved in the model.

The hypotheses testing required in analyzing a moderator in Figure 6

7.6 MODELING THE MODERATING EFFECTS FOR LATENT

Figure 7: Modeling the moderator variable in the path between X1 and Y

ANALYZING THE MODERATOR FOR LATENT CONSTRUCTS:

There are few steps involved in performing Multi-Group CFA:

Repeat the same procedure using dataset 2.

Figure 8: The path where the moderator Education is to be examined.

The Chi-Square Value and DF for the constrained model

The hypothesis statement:

The Chi-Square value and DF for the constrained model

The Chi-Square Value and DF for the unconstrained model

The hypothesis statement:

The Chi-Square value and DF for the constrained model

The Chi-Square Value and DF for the Unconstrained Model

The hypothesis statement:

The Chi-Square value and DF for the constrained model

The Chi-Square Value and DF for the Unconstrained Model

The hypothesis statement:

COMPARING THE GROUP EFFECTS FOR A MODERATOR

Low Education Group

High Education Group

The Effect of X2 on Y is Significant for High Education Group

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