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Saving Incentives for Low- and Middle-Income Families: Evidence from a Field Experiment with H&R Block

  • Esther Duflo
  • William Gale
  • Jeffrey Liebman
  • Peter Orszag
  • Emmanuel Saez

We analyze a randomized experiment in which 14,000 tax filers in H&R Block offices in St. Louis received matches of zero, 20 percent, or 50 percent of IRA contributions. Take-up rates were 3 percent, 8 percent, and 14 percent, respectively. Among contributors, contributions, excluding the match, averaged $765 in the control group and $1100 in the match groups. Taxpayer responses to similar incentives in the Saver's Credit are much smaller. Taxpayers did not game the experiment by receiving a match and strategically withdrawing funds. Tax professionals significantly influenced contribution choices. These results suggest that both incentives and information affect behavior. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 121 (2006)
Issue (Month): 4 (November)
Pages: 1311-1346

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Handle: RePEc:tpr:qjecon:v:121:y:2006:i:4:p:1311-1346
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  1. Gary V. Engelhardt & Anil Kumar, 2007. "Employer matching and 401(k) saving: Evidence from the health and retirement study," NBER Chapters, in: Trans-Atlantic Public Economics Seminar (TAPES), Public Policy and Retirement, pages 1920-1943 National Bureau of Economic Research, Inc.
  2. James J. Choi & David Laibson & Brigitte C. Madrian, 2005. "$100 Bills on the Sidewalk: Suboptimal Saving in 401(k) Plans," Levine's Bibliography 784828000000000649, UCLA Department of Economics.
  3. James J. Choi & David Laibson & Brigitte C. Madrian, 2005. "$100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans," NBER Working Papers 11554, National Bureau of Economic Research, Inc.
  4. Burman, Leonard E. & Gale, William G. & Hall, Matthew & Orszag, Peter R., 2004. "Distributional Effects of Defined Contribution Plans and Individual Retirement Arrangements," National Tax Journal, National Tax Association, vol. 57(3), pages 671-701, September.
  5. Eckel, Catherine C. & Grossman, Philip J., 2003. "Rebate versus matching: does how we subsidize charitable contributions matter?," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 681-701, March.
  6. Andrea L. Kusko & James M. Poterba & David W. Wilcox, 1994. "Employee Decisions with Respect to 401(k) Plans: Evidence From Individual-Level Data," NBER Working Papers 4635, National Bureau of Economic Research, Inc.
  7. Papke, Leslie E. & Poterba, James M., 1995. "Survey evidence on employer match rates and employee saving behavior in 401(k) plans," Economics Letters, Elsevier, vol. 49(3), pages 313-317, September.
  8. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Illusory Effects of Saving Incentives on Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 113-138, Fall.
  9. James M. Poterba & Steven F. Venti & David A. Wise, 1996. "How Retirement Saving Programs Increase Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 91-112, Fall.
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