Panel Paper: From Savings to Ownership: Third-Year Impacts from the Assets for Independence Program Randomized Evaluation

Saturday, November 9, 2019
Plaza Building: Concourse Level, Plaza Ballroom E (Sheraton Denver Downtown)

*Names in bold indicate Presenter

Caroline Ratcliffe1, Signe-Mary McKernan2, Gregory Mills2, Michael Pergamit2 and Breno Braga2, (1)Consumer Financial Protection Bureau, (2)Urban Institute

Background: Individual development accounts (IDAs) help low-income families save by matching their personal savings for specific investments. The Assets for Independence (AFI) program, which was last funded in fiscal year 2016, is a federally supported IDA grant program authorized under the Assets for Independence Act of 1998. Our first-year evaluation at two sites—Albuquerque and Los Angeles—showed that AFI increased low-income participants’ savings one year into the program and reduced their material hardship. We hypothesize increases in asset ownership in the medium-term: first-home purchase, business capitalization, and postsecondary education or training. We propose to present the forthcoming third-year evaluation findings at APPAM.

Research question

  • This study examines the AFI program’s effects on participants, addressing the following research questions through an experimental design:
  • What are the impacts of AFI program participation on outcomes such as homeownership, business ownership, and postsecondary education?
  • How do the impacts of AFI program participation vary by participant characteristics?
  • What are the impacts of AFI program participation on other outcome domains that the program might influence (e.g., material hardship, alternative financial services use, and economic well-being)?

Data/Methods: To answer our key research questions, we use baseline and third-year follow-up survey data. Constructed outcome variables correspond to our primary hypothesized domain—asset ownership, and secondary domains such as material hardship avoidance, alternative financial products, employment, and personal outlook.

We randomly assigned 807 study participants at the two AFI project sites to a treatment group and a control group. Each site first determined applicant eligibility. Applicants then provided their consent to participate in the study, completed the baseline survey, and underwent random assignment (407 to the treatment group and 400 to the control group). We estimate third-year impacts using multivariate models with baseline characteristics (and baseline values of dependent variables) as covariates.

Significance of the paper: The AFI program is one of the few federal efforts that encourage low-income people to save. Most federal asset-building subsidies disproportionately benefit high-income families who are more likely to shift savings in response to incentives rather than create new savings. Asset limits in many benefits programs create a disincentive for low-income people to save outside an AFI IDA.

Roughly four in ten Americans experience material hardship each year (Urban Institute) and the same share cannot cover an emergency $400 expense (Federal Reserve Board). AFI is a program aimed at helping families build savings not just for today but for upward mobility. Gold standard experimental evidence shows that, in the first-year AFI increased savings and reduced material hardship. This third-year follow up takes the next step and provides evidence on asset ownership and economic stability.