How Skills Acquired during Youth Affect Later Racial and Ethnic Homeownership Gaps

32 Pages Posted: 10 Nov 2021 Last revised: 15 Nov 2021

See all articles by Liyi Liu

Liyi Liu

Federal Home Loan Mortgage Corporation (FHLMC)

Douglas A. McManus

Federal Home Loan Mortgage Corporation (FHLMC)

Date Written: November 8, 2021

Abstract

The effects of skills achieved in early adulthood—as measured by the Armed Forces Qualifying Test (AFQT) score, the Rotter score, and Deming’s (2017) Social score—are shown to impact education, income, and homeownership levels achieved in later life. Mediation analysis is used to identify both the direct and indirect effects of these scores on homeownership. We show that the AFQT score not only has direct effects on the homeownership rate, but also indirect effects through the mediator variables, education, and income. The AFQT scores in early adulthood is 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 the lifecycle.

Keywords: Homeownership, cognitive and non-cognitive skills, human capital

JEL Classification: I24, J13, J15, R21

Suggested Citation

Liu, Liyi and McManus, Douglas A., How Skills Acquired during Youth Affect Later Racial and Ethnic Homeownership Gaps (November 8, 2021). Available at SSRN: https://ssrn.com/abstract=3959360 or http://dx.doi.org/10.2139/ssrn.3959360

Liyi Liu

Federal Home Loan Mortgage Corporation (FHLMC) ( email )

8200 Jones Branch Road
McLean, VA 22101
United States

Douglas A. McManus (Contact Author)

Federal Home Loan Mortgage Corporation (FHLMC) ( email )

8200 Jones Branch Road
McLean, VA 22101
United States
703-903-2953 (Phone)

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