A Framework for Financial Benefit-Cost Analysis of Individual Development Accounts at the Experimental Site of the American Dream Demonstration

The American Dream Demonstration is an evaluation of whether Individual Development Accounts (IDAs) are likely to achieve their intended purposes cost-effectively. Financial benefit-cost analysis is a key input into this overall evaluation. The framework here describes how to estimate the present value of changes in resource flows caused by IDAs for seven groups of stakeholders: IDA participants, non-participants, the federal government, state and local government, employees of IDA programs, private donors, and society as a whole. The goal of the framework is to make sure that the financial BCA considers the most important issues and that the analysts know the logic of the BCA well enough to catch and to fix flaws in the plan once they are in the field. Although the framework emphasizes the types of benefits and costs expected to matter most for IDAs, it could also be applied to other public interventions.