Paper

Match Rates, Individual Development Accounts and Saving by the Poor

How to adequately analyze the effect of match rates on savings?

Individual Development Accounts (IDAs) provide poor people with matches for savings used for home purchase, post-secondary education, or microenterprise. Match rates for IDAs in the American Dream Demonstration (ADD) were typically 1:1 or 2:1 but ranged as high as 7:1. How did the match rate affect IDA savings? The analysis here controls for a number of confounding factors often ignored in similar studies of 401(k) plans. In ADD, higher match rates were generally associated on the extensive margin with a greater likelihood of saving something in IDAs and-on the intensive margin for those who saved something-a lower level of IDA savings.