Abstract
Latent class mediation modeling is designed to estimate the mediation effect when both the mediator and the outcome are latent class variables. We suggest using an adjusted one-step approach in which the latent class models for the mediator and the outcome are estimated first to decide on the number of classes, then the latent class models and the mediation model are jointly estimated. We present both an empirical demonstration and a simulation study to compare the performance of this one-step approach to a standard three-step approach with modal assignment (modal) and four different modern three-step approaches. Results from the study indicate that unadjusted modal, which ignores the classification errors of the latent class models, produced biased mediation effects. On the other hand, the adjusted one-step approach and the modern three-step approaches performed well with respect to bias for estimating mediation effects, regardless of measurement quality (i.e., model entropy) and latent class size. Among the three-step approaches we investigated, the maximum likelihood method with modal assignment and the BCH correction with robust standard error estimators are good alternatives to the adjusted one-step approach, given their unbiased standard error estimations.