Liquidity Affects Job Choice: Evidence from Teach For America

The main research question is whether many Americans lack the liquidity to accept a job offer. We test this by randomly varying the size of grants and loans in an existing transitional funding program provided to early career job applicants. The hypothesis is that even small increases in cash on hand -- in the form of grant or loan money -- will increase the likelihood of accepting the job. We implement the experiment with Teach For America, a teacher placement organization. The experiment takes place over three years with 7,295 admits to TFA who apply for and are eligible for all transitional funding. Transitional funding decisions are made in “batches”, about once per week from October through June. We randomize to treatment arms within each batch. In the first two years, the treatment arms provide modest increases in transitional funding by increasing either the grants or loans provided. The third year is a “self-replication” and stress test of the first two years of results. To self-replicate, for those who exhibited a treatment effect in the first two years (and those in similar, but slightly better financial shape), we maintain the same treatment assignments. To stress test the null results, for those who did not exhibit a treatment effect, we tripled the size of the main experimental variation. Across all three years, we find that for admits whose expected costs of moving exceed their estimated cash on hand, providing immediate financial assistance increases their odds of accepting their TFA offer. Further, we find no treatment effects, even for large financial assistance, when provided to admits whose cash-on-hand exceeds their expected costs. We measure “accepting the job” by whether or not the job applicant is working through Teach For America as of the first day of school on the first semester of their assignment.