This year the Nobel Prize in Economics has been awarded to three economists – David Card, Joshua Angrist and Guido Imbens.
One half of the Sveriges Riksbank Prize in Economic Sciences is presented to Canadian-born David Card, 65 who currently works at University of California, Berkley. His natural experiments on the impact of fast-food segment of minimum wage increase in New Jersey has helped understand the labour market effects of minimum wages, immigration and education.
The other half of the nobel prize has been conferred jointly to Joshua D Angrist from Massachusetts Institute of Technology and Dutch-American Guido W Imbens, 58, from Stanford University. They have won the award for their phenominal contribution in causal relationships using natural experiments. Natural experiments are very different from therapeutic trials in the sense that, here economists do not control the parameters of the experiment. It ushered in a “credibility revolution” in economics, in which empirical data had not previously been taken seriously. In mid 1990s, Angrist and Imbens had solved methodological problems to show that precise conclusions about cause and effect could be drawn from them.
David Card and his colleague the late Alan Krueger, who died in 2019, studied the relationship between the minimum wage and employment. They found that an increase in the hourly minimum wage did not affect employment, challenging conventional wisdom which held that an increase in minimum wage will lead to less hiring. Card also challenged that immigrants depress wages for native-born workers. He found that incomes of the native-born can benefit from new immigration, while it is earlier immigrants who are at risk of being negatively affected.
American-Israeli Joshua Angrist had also collaborated with Krueger to check the link between education and income. He compared the time spent in the education system by people born in the same year according to their month of birth. Those born at the beginning of the year had the opportunity to leave school a little earlier and had on average a shorter education than those born later in the year. They also had lower wages. This allowed Angrist to determine that higher levels of education generally led to higher wages. Imbens subsequently worked with Angrist to refine the interpretation of those results.
