Match Rates and Savings: Evidence from Individual Development Accounts
AbstractHow do people respond to matched-savings incentives? Studies of 401(k) plans find that matching increases participation but that higher match rates do not increase--and may decrease--the level of savings. This paper analyzes saving by low-income people in Individual Development Accounts (IDAs), a new savings incentive that matches withdrawals if used for home purchase, post-secondary education, or self-employment. The model controls for several sources of bias common in estimates of match-rate effects: unobserved heterogeneity among firms and among participants, censoring of savings at the match cap, and an inverse relationship between match rates and match caps. In IDAs, higher match rates are associated with an increased probability of continued participation but also with a decreased level of savings.
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Bibliographic InfoPaper provided by EconWPA in its series Microeconomics with number 0108003.
Length: 65 pages
Date of creation: 02 Sep 2001
Date of revision: 27 Dec 2001
Note: Type of Document - Adobe Acrobat 3.0; prepared on Windows 98; to print on Adobe Acrobat 3.0; pages: 65 ; figures: Included in pdf file
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Savings incentives; asset accumulation; match rates; retirement; income effect; substitution effect;
Find related papers by JEL classification:
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
- I3 - Health, Education, and Welfare - - Welfare and Poverty
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