Impact of skills in early adulthood on lifetime homeownership disparities

Liyi Liu and Douglas McManus

Journal of Housing Economics, 2024, vol. 65, issue C

Abstract: This paper shows that skills acquired by early adulthood affect homeownership levels achieved later in life in important ways. The paper examines three sets of skills—cognitive skills, as measured by the Armed Forces Qualifying Test (AFQT) score; non-cognitive skills (specifically, the degree to which people believe that they have control over the outcome of events in their lives), measured by the Rotter score; and social skills, using a Social score based on Deming (2017). Mediation analysis is used to identify both the direct and indirect effects of these skills, as captured by the three different types of scores, on homeownership. We show that the AFQT score measuring cognitive skills not only captures direct effects on the homeownership rate, but even larger indirect effects through the mediator variables—education and income. AFQT scores in early adulthood are shown to be highly predictive of homeownership outcomes, explaining roughly one-quarter to one-third of the disparate outcomes between White, Black, and Hispanic households. We also examine the degree to which the AFQT, Rotter, and Social scores explain variation in homeownership rates over an individual's life cycle. The findings suggest that reducing disparities in educational outcomes would meaningfully contribute to reducing minority homeownership gaps.

Keywords: Homeownership gap; Achievement gap; Social capital (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:65:y:2024:i:c:s1051137724000305

DOI: 10.1016/j.jhe.2024.102011

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