Description: Department of Economics

Description: Johannes Spinnewijn

| LSE Economics |

| CV |

| Publications |

| Working Papers|

| In Progress|

| Teaching|

| Miscellaneous|

Johannes Spinnewijn

Position: Lecturer (Assistant Professor) in Economics

Research Interests: Public Economics, Behavioral Economics, Applied Theory

Contact details:

Other Roles/Affiliations:


Working Papers

  • The Optimal Timing of Unemployment Benefits: Theory and Evidence from Sweden - NEW - (with Jonas Kolsrud, Camille Landais and Peter Nilsson) - Slides

    Abstract: This paper provides a simple, yet general framework to analyze the optimal time profile of benefits during the unemployment spell. We derive simple sufficient-statistics formulae capturing the insurance value and incentive costs of unemployment benefits paid at different times during the unemployment spell. Our general approach allows to revisit and evaluate in a transparent way the separate arguments for inclining or declining profiles put forward in the theoretical literature. We then estimate our sufficient statistics using administrative data on unemployment, income and wealth in Sweden. First, we exploit duration-dependent kinks in the replacement rate and find that the moral hazard cost of benefits is larger when paid earlier in the spell. Second, we find that the drop in consumption determining the insurance value of benefits is large from the start of the spell, but further increases throughout the spell. On average, savings and credit play a limited role in smoothing consumption. Our evidence therefore indicates that the recent change from a flat to a declining benefit profile in Sweden has decreased welfare. In fact, the local welfare gains push towards an increasing rather than decreasing benefit profile over the spell.

  • Heterogeneity, Demand for Insurance and Adverse Selection - R&R at American Economic Journal: Economic Policy - (Web Appendix)

    Abstract: Recent evidence underlines the importance of demand frictions distorting insurance choices. Heterogeneous frictions cause the willingness to pay for insurance to be biased upward (relative to value) for those purchasing insurance, but downward for those who remain uninsured. The paper integrates this finding with standard methods for evaluating welfare in insurance markets and demonstrates how welfare conclusions regarding adversely selected markets are affected. The demand frictions framework also makes qualitatively different predictions about the desirability of policies like insurance subsidies, mandates and risk-rating, commonly used to tackle adverse selection.

  • Rewarding Schooling Success and Perceived Returns to Education: Evidence from India (with Sandra Sequeira and Guo Xu)

    Abstract: This paper tests two specific mechanisms through which individuals may form expectations about returns to investments in education: receiving recognition for one's schooling performance, and exposure to successful students through family or social networks. Using a regression discontinuity design, we study the impact of a fellowship program recognizing the schooling performance of young girls in secondary school in India. We find that the fellowship award is associated with a significant increase in the perceived value of education, by both increasing the perceived mean of earnings and decreasing the perceived variance in earnings associated with additional years of schooling. Being exposed to successful students does not affect perceived returns to education for those in their family or social networks. This exposure is however associated with holding more information on potential sources of funding for schooling and a higher intention to apply for the fellowship.

In Progress

  • Inferring Risk Perceptions and Preferences using Choice from Insurance Menus: Theory and Evidence - DRAFT COMING SOON - (with Keith Ericson, Philipp Kircher and Amanda Starc)

    Abstract: Demand for insurance can be driven by high risk aversion or high risk. We show how to separately identify risk preferences and risk types using only choices from menus of insurance plans. Our revealed preference approach does not require individuals to have rational expectations, nor does it require access to claims data. We show what can be learned non-parametrically from a single insurance menu versus from variation between menus. We prove that our approach allows for full identification in the textbook model with binary risks and extend our results to continuous risks. We illustrate our approach using the Massachusetts Health Insurance Exchange, where choices provide bounds on the risk type distribution, but cannot reject homogeneity in preferences.

  • Information Frictions and Adverse Selection: Policy Interventions in Health Insurance Markets - DRAFT COMING SOON - (with Ben Handel and Jon Kolstad)

    Abstract: A large literature has analyzed pricing inefficiencies in health insurance markets due to adverse selection. Recent evidence, however suggests that many consumers have information frictions that lead to poor health plan choices for given market prices. As a result, policymakers have implemented and consider policies such as information provision, plan recommendations, and smart defaults to steer consumers towards the best possible existing plans for them. In this paper we develop a general framework to study insurance market equilibrium and evaluate policy interventions in the presence of choice frictions. Friction-reducing policies can increase welfare by facilitating better matches between consumers and plans, but can decrease welfare by increasing the correlation between willingness-to-pay and costs, exacerbating adverse selection. We identify relationships between the underlying distributions of consumer (i) costs (ii) surplus from risk protection and (iii) choice frictions that determine whether friction-reducing policies will be on net welfare increasing or reducing. We extend the analysis to study how policies to improve consumer choices interact with the supply-side policy of risk-adjustment transfers and show that the effectiveness of the latter policy can have important implications for the effectiveness of the former. We implement the model empirically using proprietary data on insurance choices, utilization, and consumer information from a large firm. We leverage structural estimates from prior work with these data and highlight how the model's micro-foundations can be estimated in practice. We find that friction-reducing policies exacerbate adverse selection, essentially leading to the market fully unraveling, and reduce welfare. Risk-adjustment transfers are very complementary, substantially mitigating the negative impact of friction-reducing policies, but having little effect in their absence.

  • The Perceptions of Employment Prospects during the Unemployment Spell (with Andreas Mueller and Giorgio Topa)

Current Courses Taught

  • Public Economics (PhD, LSE course, ec534)
  • Public Economics (MSc, LSE course, ec426)
  • Contract Economics (BSc, LSE course, ec301)
  • Introductory Microeconomics (Summer, LSE course, ec101)

Press Coverage/Other Writings

  • "Hard cash or a secure job - which is better?" featured in Financial Times (February 7, 2009) (link)
  • "The Role of Commitment" comment on "On the interaction between subsidiarity and interpersonal solidarity" by Jacques Dreze (link)
  • "En als we langdurig werklozen meer zouden betalen?" Op-ed in De Morgen (February 12, 2012) (link)
  • "De ivoren toren van economen is een mythe" Op-ed in De Standaard (August 3, 2013) (link)
  • "De mythe van de hangmat" Op-ed in De Standaard (May 15, 2014) (link)

© 2015 London School of Economics. All rights reserved. Picture by Jef Boes.