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Description: Johannes Spinnewijn

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Johannes Spinnewijn

Position: Lecturer (Assistant Professor) in Economics

Research Interests: Public Economics, Contract Theory, Behavioral Economics

Capital Income Taxes with Heterogeneous Discount Rates (with Peter Diamond) - AEJ: Economic Policy 3(4), November 2011

Abstract: With heterogeneity in both skills and discount factors, the Atkinson-Stiglitz theorem that savings should not be taxed does not hold. In a model with heterogeneity of preferences at each earnings level, introducing a savings tax on high earners or a savings subsidy on low earners increases welfare, regardless of the correlation between ability and discount factor. Extending Saez (2002), a uniform savings tax increases welfare if that correlation is sufficiently high. Key for the results is that types who value future consumption less are more tempted by a lower paid job. Some optimal tax results and empirical evidence are presented.

Solutions Manual to Accompany Contract Theory (with Arthur Campbell, Moshe Cohen and Florian Ederer)
The MIT Press (September 30, 2007), 144 pages

Heterogeneity, Demand for Insurance and Adverse Selection (Web Appendix) - NEW

Abstract: Recent empirical work finds that surprisingly little variation in the demand for insurance is explained by heterogeneity in risks. I distinguish between heterogeneity in risk preferences and risk perceptions underlying the unexplained variation. Heterogeneous risk perceptions induce a systematic difference between the revealed and actual value of insurance as a function of the insurance price. Using a sufficient statistics approach that accounts for this alternative source of heterogeneity, I find that the welfare conclusions regarding adversely selected markets are substantially different. The source of heterogeneity is also essential for the evaluation of different interventions intended to correct inefficiencies due to adverse selection like insurance subsidies and mandates, risk-adjusted pricing and information policies.

Information Search and Disclosure in Groups (with Arthur Campbell and Florian Ederer) - Submitted

Abstract: We analyze costly information acquisition and information revelation in groups in a dynamic setting. Even when group members have perfectly aligned interests the group may inefficiently delay decisions. When deadlines are far away, uninformed group members freeride on each others' efforts to acquire information. When deadlines draw close, informed group members stop revealing their information in an attempt to incentivize other group members to continue searching for information. Surprisingly, setting a tighter deadline may increase the expected decision time and increase the expected accuracy of the decision in the unique equilibrium. As long as the deadline is set optimally, welfare is higher when information is only privately observable to the agent who obtained information rather than to the entire group.

Unemployed but Optimistic: Optimal Insurance Design with Biased Beliefs - Submitted

Abstract: This paper analyzes how job seekers' biased perceptions about their employment prospects affect the optimal design of unemployment insurance. Biased perceptions change the perceived value of insurance and the perceived return to search efforts. Policies implementing standard "sufficient-statistics" formula become sub-optimal and a wedge arises between social and private insurance. A paternalistic social planner corrects for the implied search distortions, while private insurers respond to the misperceived value of insurance. Empirically, I find that unemployed job seekers greatly overestimate how quickly they will find work. As a consequence, privatizing unemployment insurance results in too low or rapidly decreasing unemployment benefits.

Insurance and Perceptions: How to Screen Optimists and Pessimists - Submitted

Abstract: People have very different beliefs about the risks they face, even when these risks are identical. I analyze how heterogeneous risk perceptions affect the insurance contracts offered by profit-maximizing firms. An essential distinction is how risk perceptions affect the willingness to pay for insurance relative to the willingness to exert risk-reducing effort. This determines both the sign of the correlation between risk and insurance coverage in equilibrium, shedding new light on a recent empirical puzzle, and the type of individuals screened by either monopolistic or competing firms. Even with perfect competition, heterogeneous risk perceptions may well strengthen the case for government intervention in insurance markets.

Training and Search During Unemployment - Submitted

Abstract: Displaced workers often experience large losses in earnings, even a long time after reemployment. Training programs during unemployment mitigate these losses but also affect the unemployed's willingness to search. This paper analyzes how mandatory training programs affect the optimal design of unemployment insurance and how the training intensity should evolve during the unemployment spell. I find that the optimal path of unemployment consumption may be reversed when introducing training programs and that even the long-term unemployed should be incentivized to find employment despite the depreciation of human capital during unemployment. Targeting training programs towards the long-term unemployed is optimal only if the fall in human capital upon displacement is small relative to the depreciation during unemployment.

Revising Claims and Resisting Ultimatums in Bargaining Games (with Frans Spinnewyn) - Submitted

Abstract: We propose a mechanism which implements a unique solution to the bargaining problem with two players in subgame-perfect equilibrium. Players start by making claims and accept a compromise only if they cannot gain by pursuing their claim in an ultimatum. The player offering the lowest resistance to his opponent's claim can propose a compromise. The unique solution depends on the extent to which claims can be revised. If no revisions are allowed, compatible claims implement the Nash solution. If all revisions are allowed, maximal claims implement the Kalai-Smorodinsky solution.

"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)