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Ethnicity, endogeneity, and housing tenure choice.

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The Journal of Real Estate Finance and Economics, 20, 323-341

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Bourassa explores the complex interplay between ethnicity and housing tenure decisions, with a specific focus on the aspect of endogeneity in these choices.

The study delves into how ethnic background influences whether individuals choose to rent or own their homes. As the article notes, home ownership rates for New Zealanders of European descent aged twenty five to fifty four are 16 percentage points higher than for Māori in the same age group. The article 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 “endowment” and “residual” 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 article also applies more appropriate methods for estimating incomes and wealth than have been used in most previous studies of tenure choice. Bourassa employs a rigorous methodological approach to address the endogeneity issue, ensuring that the ethnic influences on housing decisions are accurately isolated and interpreted. 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. This research provides valuable insights into the socio-economic factors that drive housing tenure choices among different ethnic groups, offering a nuanced understanding of housing market dynamics. It is particularly relevant for economists, real estate professionals, and policy-makers concerned with housing policies and their implications for diverse communities.

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