RDP 2005-03: Property Owners in Australia: A Snapshot Appendix C: Detailed Econometric Results

This Appendix contains the more detailed results of the regressions underlying Tables 1 to 4 and are presented in Tables C1 to C4. We considered all variables listed in Appendix A as potential explanatory variables in all the models, except for ‘Region’, ‘Own home’, ‘Previous owner’, ‘Value of own home’ and ‘Total property value’. These were only considered in some of the models based on economic reasoning.

Other factors were considered as potential explanators, such as the structure of the household, the remoteness of the location where the household lives, the country of birth of the household reference person, the first language spoken by the household reference person, the occupation of the household reference person and the health status of the household reference person. But they either were statistically not significant or were highly collinear with other variables of major economic interest.

We also examined the robustness of the models to alternative specifications. The results seem to be robust to the inclusion of insignificant variables in the model. As would be anticipated, some coefficients change slightly with changes to the model, such as linear terms when a quadratic term of the same variable is removed or when the reference base for a set of dummy variables changes. Of the other substantial changes in the results, the magnitudes of the coefficients of the age terms in the models where they are insignificant – the two property value equations – appear to be influenced by the removal of the time employed and marital status variables. For the home value equation, the exclusion of the (insignificant) squared wealth term also results in the linear age term halving. Also for the home value model, the part-time employee coefficient doubles with the exclusion of the casual worker variable. This reflects that around half of all reference persons who are casual workers also work part-time.

In terms of the model reduction process, we used a general-to-specific modelling approach where variables were dropped sequentially if they were insignificant at the 10 per cent level of significance. There were some modifications to the basic rule, whereby an insignificant linear term was retained if the quadratic term was significant. We also retained both the linear and quadratic terms even if both were insignificant so long as they were for a variable of special interest, such as age, income or net wealth. Control variables, such as the region dummy variables, were only included if they substantially improved the fit of the model. For instance, the region dummy variables were only included in the home value model, because they seemed to capture the effect of house prices being much higher in the Sydney region than elsewhere in the country.