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The Effects of Welfare and IDA Program Rules on Asset Holdings of Low-Income Families

Publication Date

By: Signe-Mary McKernan and Caroline Ratcliffe The Urban Institute and Yunju Nam Center for Social Development Washington University in St. Louis

This report was prepared for and funded by the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation (HHS/ASPE) under Order Number GS23F8198H / HHSP233200400131U to the Urban Institute and its collaborators at the Center for Social Development (CSD) at Washington University in St. Louis, and the New America Foundation. This report was prepared between September 2004 and July 2007. John Tambornino, Linda Mellgren, and Jeremías Alvarez at HHS were project officers, Signe-Mary McKernan of the Urban Institute was overall project director, and Michael Sherraden directed the work at CSD. Views expressed are those of the authors and do not represent official positions of the Department of Health and Human Services, the Urban Institute, its trustees, or its sponsors.

Project Home Page: Poor Finances: Assets and Low-Income Households


Executive Summary (in PDF format, 4 pages)

Introduction to the Series


The report has benefited from helpful comments and suggestions from Jeremías Alvarez, Alana Landy, Gretchen Lehman, Ann McCormick, Linda Mellgren, Don Oellerich, and Canta Pian of ASPE and John Tambornino of the Administration for Children and Families (ACF)/HHS. William Margrabe at the Urban Institute provided excellent research assistance.

This report is part of a series entitled Poor Finances:  Assets and Low-Income Households, produced in a partnership between the Urban Institute, Center for Social Development, and New America Foundation. We thank the team members at the Center for Social Development and New America Foundation for their positive and productive partnership.


The results of this study suggest that various state program rules adopted since the mid-1990s, especially those aimed at asset building, are positively related to low-education single mothers' and families' asset holdings. The analysis suggests that more lenient asset limits in means-tested programs and more generous IDA program rules may have positive effects on asset holdings. These results suggest that maintaining and expanding these programs may help promote asset ownership among economically vulnerable populations.

Findings from the primary models suggest that not every asset-building program rule has the same effect. For example, more lenient limits on restricted accounts are positively related to liquid assets, while relaxed asset limits on unrestricted accounts have no significant relationship with any type of asset holdings. More generous IDA rules, on the other hand, are positively related to both liquid asset holdings and net worth. The different incentive structures and program operations may have produced distinct outcomes: restrictions on withdrawals and incentives which are built into IDA and restricted asset account limits may have motivated low-education single mothers and families to save and helped them resist the temptation to spend. Accordingly, asset-building program rules could be designed carefully to achieve policy goals.

Findings from an alternate specification that measures the years since the programs or broad measures of more generous rules were implemented corroborate the IDA rule findings but not the unrestricted versus restricted asset limit findings. This is the first study (known to the authors) to look at the net relationships of restricted and unrestricted asset limits. The results are suggestive, but not conclusive, that restricted account asset limits have different effects on asset building than unrestricted asset limits do. Additional research on this topic could shed further light on the role that unrestricted asset limits, restricted account asset limits, and IDA programs play in asset building.

This study also shows that other non-asset related program rules have a relationship with the asset holdings of low-education single mothers and families. For example, vehicle asset limits and expanded categorical eligibility in the Food Stamp Program are positively related to vehicle assets and net worth. These findings suggest that potential program interactions and indirect effects of program rules on non-target areas are potentially important and could continue to be considered in future research.

The mixed results of this study and previous studies of the effects of asset limits indicate that further research on how people respond to the complex and contradictory incentive structure presented by asset limits and asset-building programs would be helpful. This additional knowledge would make a meaningful contribution to the policy discussion and could lead to more effective asset policies for low-income people.

Questions about the Project or any of the Papers?

Please contact: Gretchen Lehman Social Science Analyst Office of Human Services Policy Office of the Assistant Secretary for Planning and Evaluation U.S. Dept. of Health and Human Services 200 Independence Ave SW, Room 426F.6 Washington, DC 20201 202-401-6614 (phone) 202-690-6562 (fax)