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Match Rates and Savings: Evidence from Individual Development Accounts

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  • Mark Schreiner

    (Washington University in St. Louis)

Abstract

How 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.

Suggested Citation

  • Mark Schreiner, 2001. "Match Rates and Savings: Evidence from Individual Development Accounts," Microeconomics 0108003, University Library of Munich, Germany, revised 27 Dec 2001.
    • Handle: RePEc:wpa:wuwpmi:0108003
    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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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/0108/0108003.pdf
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    References listed on IDEAS

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    5. Bernheim, B. Douglas, 2002. "Taxation and saving," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 18, pages 1173-1249, Elsevier.
    6. James M. Poterba & Steven F. Venti, 1994. "401(k) Plans and Tax-Deferred Saving," NBER Chapters, in: Studies in the Economics of Aging, pages 105-142, National Bureau of Economic Research, Inc.
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    11. R. Glenn Hubbard & Jonathan S. Skinner, 1996. "Assessing the Effectiveness of Saving Incentives," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 73-90, Fall.
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    Cited by:

    1. Michael Sherraden & Mark Schreiner & Sondra Beverly, 2003. "Income, Institutions, and Saving Performance in Individual Development Accounts," Economic Development Quarterly, , vol. 17(1), pages 95-112, February.
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    More about this item

    Keywords

    Savings incentives; asset accumulation; match rates; retirement; income effect; substitution effect;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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