Income, Institutions, and Saving Performance in Individual Development Accounts

This paper examines the relationship between income and saving performance in Individual Development Accounts (IDAs). It first discusses theories of saving. Next, for IDA participants in the American Dream Demonstration, it looks at income sources and distribution, followed by tabulations of income and IDA savings outcomes. Following this, it discusses the results from regression analyses on IDA savings outcomes. The authors find that the IDA savings amount did not increase with income, and that the IDA savings rate decreased with income. Although the data do not reveal exactly what caused this, the authors believe that institutional factors in IDA programs played an important role.