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October 11, 2021

The Royal Swedish Academy of Sciences announces the Nobel Prize in Economic Sciences 2021

Nobel Prize in Economics 2021

Photo: David Card, Jousha Angrist and Guido Imbens. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2021. Image provided by & Credit: © Nobel Prize Outreach 2021 Ill. Niklas Elmehed.

Nobel Prize in Economics 2021

Nobel Prize in Economics 2021

Stockholm, October 11, 2021 — The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2021.

With one half to —

David Card
The University of California, Berkeley, USA

“For his empirical contributions to labor economics.”

And the other half jointly to —

Joshua D. Angrist
Massachusetts Institute of Technology, Cambridge, USA

Guido W. Imbens
Stanford University, USA

“For their methodological contributions to the analysis of causal relationships.”

• Natural experiments help answer important questions for society.

This year’s Laureates - David Card, Joshua Angrist, and Guido Imbens - have provided new insights into the labor market. They have shown what conclusions about cause and effect one can draw from natural experiments. Their approach has spread to other fields and revolutionized empirical research.

Many of the big questions in the social sciences deal with cause and effect. How does immigration affect pay and employment levels? How does a more comprehensive education affect someone’s future income? These questions are difficult to answer because we have nothing to use as a comparison. We do not know what would have happened if there had been less immigration or if that person had not continued studying.

However, this year’s Laureates have shown that it is possible to answer these questions using natural experiments. The key is to handle situations in which chance events or policy changes result in groups of people being treated differently in a way that resembles clinical trials in medicine.

Using natural experiments, David Card has analyzed the labor market effects of minimum wages, immigration, and education. His studies from the early 1990s challenged conventional wisdom, leading to new analyses and additional insights. The results showed, among other things, that increasing the minimum wage does not necessarily lead to fewer jobs. In addition, we now know that the incomes of people born in a country can benefit from new immigration, while people who immigrated at an earlier time risk being negatively affected. Finally, we have also realized that resources in schools are far more critical for students’ future labor market success than was previously thought.

Data from a natural experiment is difficult to interpret, however. For example, extending compulsory education by a year for one group of students (but not another) will not affect everyone in that group in the same way. Moreover, some students would have kept studying anyway and, for them, the value of education is often not representative of the entire group. So, is it even possible to draw any conclusions about the effect of an extra year in school? In the mid-1990s, Joshua Angrist and Guido Imbens solved this methodological problem, demonstrating precise conclusions about cause and effect from natural experiments.

“Card’s studies of core questions for society and Angrist and Imbens’ methodological contributions have shown that natural experiments are a rich source of knowledge. Moreover, their research has substantially improved our ability to answer critical causal questions, which has been of great benefit to society,” Peter Fredriksson, chair of the Economic Sciences Prize Committee, stated.

Source: The Royal Swedish Academy of Sciences

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Edited & Posted by the Editor | 11:23 AM | Link to this Post

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