Ethnicity, Endogeneity, and Housing Tenure Choice

Home ownership rates for New Zealanders of European descent aged 25 to 54 are 16 percentage points higher than for Maori in the same age group. This paper explores the relative attainment of home ownership of the two ethnic groups by estimating a series of tenure choice models and decomposing the difference in rates into quot;endowmentquot; and quot;residualquot; effects. Particular attention is given to the endogeneity of current income and wealth relative to the tenure choice decision, and to the methods for decomposing group mean differences. The paper also applies more appropriate methods for estimating incomes and wealth than have been used in most previous studies of tenure choice. The study concludes that only a small proportion of differences in home ownership rates is explained by household endowments. It is shown that controlling for the endogeneity of income and wealth has a substantial impact on the tenure choice and decomposition results