Text Annotation via Inductive Coding: Comparing Human Experts to LLMs in Qualitative Data Analysis

Abstract: This paper investigates the automation of qualitative data analysis, focusing on inductive coding using LLMs. Unlike traditional approaches that rely on deductive methods with predefined labels, this research investigates the inductive process where labels emerge from the data. The study evaluates the performance of six open-source LLMs compared to human experts. As part of the evaluation, experts rated the perceived difficulty of the quotes they coded. The results reveal a peculiar dichotomy: human coders consistently perform well when labeling complex sentences but struggle with simpler ones, while LLMs exhibit the opposite trend. Additionally, the study explores systematic deviations in both human and LLM generated labels by comparing them to the golden standard from the test set. While human annotations may sometimes differ from the golden standard, they are often rated more favorably by other humans. In contrast, some LLMs demonstrate closer alignment with the true labels but receive lower evaluations from experts.