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Effects of individual development accounts on asset purchases and saving behavior: Evidence from a controlled experiment

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  • Mills, Gregory
  • Gale, William G.
  • Patterson, Rhiannon
  • Engelhardt, Gary V.
  • Eriksen, Michael D.
  • Apostolov, Emil

Abstract

We evaluate the first controlled field experiment on Individual Development Accounts (IDAs). Including their own contributions and matching funds, treatment group members in the Tulsa, Oklahoma program could accumulate $6750 for home purchase or $4500 for other qualified uses. Almost all treatment group members opened accounts, but many withdrew all funds for unqualified purposes. Among renters at the beginning of the experiment, the IDA increased homeownership rates after 4Â years by 7-11 percentage points and reduced non-retirement financial assets by $700-$1000. The IDA had almost no other discernable effect on other subsidized assets, overall wealth, or poverty rates.

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  • Mills, Gregory & Gale, William G. & Patterson, Rhiannon & Engelhardt, Gary V. & Eriksen, Michael D. & Apostolov, Emil, 2008. "Effects of individual development accounts on asset purchases and saving behavior: Evidence from a controlled experiment," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1509-1530, June.
  • Handle: RePEc:eee:pubeco:v:92:y:2008:i:5-6:p:1509-1530
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    1. Marieka M. Klawitter & C. Leigh Anderson & Mary Kay Gugerty, 2013. "Savings And Personal Discount Rates In A Matched Savings Program For Low-Income Families," Contemporary Economic Policy, Western Economic Association International, vol. 31(3), pages 468-485, July.
    2. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2014. "Savings by and for the Poor: A Research Review and Agenda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 36-78, March.
    3. Julie Birkenmaier & Brandy Maynard & Youngmi Kim, 2022. "Interventions designed to improve financial capability: A systematic review," Campbell Systematic Reviews, John Wiley & Sons, vol. 18(1), March.
    4. Jesse Leigh Maniff & W. Blake Marsh, 2017. "Banking on Distributed Ledger Technology: Can It Help Banks Address Financial Inclusion?," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 53-77.
    5. Eriksen, Michael D., 2010. "Homeownership subsidies and the marriage decisions of low-income households," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 490-497, November.
    6. Gennetian, Lisa A. & Castells, Nina & Morris, Pamela A., 2010. "Meeting the basic needs of children: Does income matter?," Children and Youth Services Review, Elsevier, vol. 32(9), pages 1138-1148, September.
    7. Engelhardt, Gary V. & Eriksen, Michael D. & Gale, William G. & Mills, Gregory B., 2010. "What are the social benefits of homeownership? Experimental evidence for low-income households," Journal of Urban Economics, Elsevier, vol. 67(3), pages 249-258, May.
    8. Karlan, Dean & Zinman, Jonathan, 2018. "Price and control elasticities of demand for savings," Journal of Development Economics, Elsevier, vol. 130(C), pages 145-159.
    9. Kast, Felipe & Meier, Stephan & Pomeranz, Dina, 2018. "Saving more in groups: Field experimental evidence from Chile," Journal of Development Economics, Elsevier, vol. 133(C), pages 275-294.
    10. Mason, Lisa Reyes & Nam, Yunju & Clancy, Margaret & Kim, Youngmi & Loke, Vernon, 2010. "Child Development Accounts and saving for children's future: Do financial incentives matter?," Children and Youth Services Review, Elsevier, vol. 32(11), pages 1570-1576, November.
    11. Sanjay Basu, 2014. "Improving Public Health Safety Nets After an Economic Recession," Center for Policy Research Policy Briefs 50, Center for Policy Research, Maxwell School, Syracuse University.
    12. Michal Grinstein-Weiss & Michael Sherraden & William G. Gale & William M. Rohe & Mark Schreiner & Clinton Key, 2013. "Long-Term Impacts of Individual Development Accounts on Homeownership among Baseline Renters: Follow-Up Evidence from a Randomized Experiment," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 122-145, February.
    13. Dean Karlan, Aishwarya Lakshmi Ratan, Jonathan Zinman, 2013. "Savings by and for the Poor: A Research Review and Agenda-Working Paper 346," Working Papers 346, Center for Global Development.
    14. Brigitte C. Madrian, 2012. "Matching Contributions and Savings Outcomes: A Behavioral Economics Perspective," NBER Working Papers 18220, National Bureau of Economic Research, Inc.
    15. Michal Grinstein-Weiss & Yeong Yeo & Mathieu Despard & Adriane Casalotti & Min Zhan, 2010. "Does Prior Banking Experience Matter? Differences of the Banked and Unbanked in Individual Development Accounts," Journal of Family and Economic Issues, Springer, vol. 31(2), pages 212-227, June.
    16. Grinstein-Weiss, Michal & Sherraden, Michael & Gale, William G. & Rohe, William M. & Schreiner, Mark & Key, Clinton, 2013. "Long-term effects of Individual Development Accounts on postsecondary education: Follow-up evidence from a randomized experiment," Economics of Education Review, Elsevier, vol. 33(C), pages 58-68.

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