Abstract

Individual development accounts (IDAs) have gained increasing attention as a promising tool for promoting asset building and financial inclusion among low-income families. This study investigates the impact of IDA programs on savings behavior in South Korea using a longitudinal analysis. The study employs propensity score matching (PSM) and difference-in-differences (DID) estimation to examine the causal effect of IDA program participation on savings over a three-year period. Additionally, double difference-in-differences (DDD) analysis is employed to assess the differential effects based on various demographic variables. The results reveal that participants in the IDA program experienced a significant short-term increase in savings during the early stages of the program. However, this positive effect faded over time, indicating a need for improvements in program design and implementation. Furthermore, the study also finds that the impact of IDAs did not differ significantly based on gender, marital status, or the presence of children. However, education level was found to have a systematic influence, as reflected by participants with higher education levels showing greater increases in savings. The study highlights the necessity of adopting a comprehensive approach to participant selection, encompassing those with both strong and weak saving behaviors. It also underscores the potential benefits of incentivizing voluntary saving alongside the IDA program. Furthermore, this research makes suggestions to improve the effectiveness of IDA programs in promoting financial inclusion and asset building among vulnerable populations.