2008 Small Grants Competition: Financial Risk, Assets, and Poverty
Funded research
Michal Grinstein-Weiss, University of North Carolina at Chapel Hill; William Gale, The Brookings Institution; William Rohe, Center for Urban and Regional Studies; and Michael Sherraden, Washington University, Center for Social Development Employment
Testing Long-Term Impacts of Individual Development Accounts and Asset Building on Social and Economic Well-Being
Description
Among the most challenging issues in public policy is determining the best way to help people move up the economic ladder. Traditionally, U.S. policies have used an income-based strategy focused on reducing poverty. Increasingly, policy makers have shown interest in innovative strategies that help low-income households increase their savings and assets as new approaches toward sustainable social and economic development. One asset-based strategy, the Individual Development Account (IDA), provides financial education and access to saving accounts that offer matching payments when the balances are used for asset-building purposes such as home purchase or business start-up. IDAs complement poverty alleviation programs, and aim to promote long-term financial stability and opportunity for low-income families by creating an entryway into the financial mainstream. Although many IDA programs are in operation, only limited analyses of their short-term impacts are available, and no analysis of the longer-term effects of IDAs exists.
The proposed study will analyze a fourth wave of data, which will be collected this spring, to assess the 10-year impact of IDAs among 1,103 individuals who participated in the 1998-2003 Tulsa, Oklahoma, randomized IDA experiment. These new, long-term data will be analyzed using rigorous statistical methods, such as difference-in-difference, to determine the long-term economic, sociological, and psychosocial effects of IDA program participation.
This study will provide policymakers, practitioners, and researchers with the first evidence on the long-term impacts and effectiveness of IDA programs. Because the study is based on a randomized experiment, the results should provide a noncontroversial base for furthering the discussion of IDAs and related asset-development programs, as well as informing current and future policy decisions.
