Julio J. Rotemberg

5 Results

 

Prominent Job Advertisements, Group Learning, and Wage Dispersion

What role do peers play when job seekers assess prospects? This research presents a stylized model that generates wage inequality as a result of people's reliance on peers for information about the wages that are offered in the market and the length of time one can expect to spend unemployed. The key idea of the model is that people whose peers have low wages and short unemployment spells come to expect that all jobs have relatively low wages so they accept low-wage jobs relatively quickly even when they shouldn't. People with peers that have higher wages are, instead, more choosy and wait for better jobs. Read More

Charitable Giving When Altruism and Similarity are Linked

This paper presents a model to help explain several aspects of charitable giving. First, individuals do not appear to reduce their contributions to a charity significantly when they learn that the government or other individuals have increased the funds that they devote to the charity's beneficiaries. Indeed, sometimes people increase their contributions when they hear that others have contributed more. Second, there are often several distinct charities that contribute to the same beneficiaries, and these charities frequently differ by the donor population to whom they target their appeal. Lastly, the extent to which individuals contribute to charity differs greatly, even among countries that appear otherwise quite similar. Rotemberg's model shows that two assumptions grounded in evidence from psychology are helpful in explaining these regularities. Specifically, the combination of (1) letting altruism be larger towards like-minded people and (2) having self-esteem depend on the number of people that agree with oneself is consistent with small reductions in one's own giving in response to larger giving by others. Read More

Charitable Giving When Altruism and Similarity Are Linked

Harvard Business School professor Julio J. Rotemberg looks at what makes people decide to contribute to a charity. He focuses on two psychological factors: that people feel better about themselves when other people agree with them, and that people tend to be more charitable to other like-minded people. Read More

A Behavioral Model of Demandable Deposits and Its Implications for Financial Regulation

Depositors are overconfident of their chances of recovering demandable deposits in a bank run. In a recent research paper, professor Julio J. Rotemberg reviews various government regulations available to be imposed on financial institutions—minimum capital levels, asset requirements, deposit insurance, and compulsory clawbacks—to understand how much they can help protect investors. Read More

Can a Continuously-Liquidating Tontine (or Mutual Inheritance Fund) Succeed where Immediate Annuities Have Floundered?

The changeover from defined benefit to defined contributions retirement plans in the United States has created a vast group of individuals that faces (or will face) the difficult problem of using a lump sum of assets to provide consumption for a relatively long but uncertain number of years. Up to this point, however, consumers appear not to have embraced annuitization. HBS professor Julio J. Rotemberg suggests an alternative instrument that, like immediate annuities, provides longevity insurance and postpones income until old age. In the proposed Mutual Inheritance Fund (MIF), a pool is formed by having individuals of a particular age buy shares in a mutual fund. The income from the underlying assets in the mutual fund is reinvested in the fund so that the value of the shares in an individual's name (and possibly also the number of these shares) grows over time. The basic idea behind the MIF is that the shares of pool members who die are liquidated, and the proceeds are then distributed in cash to the remaining members in proportion to the number of mutual fund shares that are currently in their name. Read More