Nobel in economics goes to researchers of labour economics and methodology

The Royal Swedish Academy of Sciences announced on Monday, October 11, that three economists working in the US will receive the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2021.
According to the academy’s press release, this year’s Laureates – David Card, Joshua Angrist and Guido Imbens – have provided us with new insights about the labour market and shown what conclusions about cause and effect can be drawn from natural experiments. Their approach has spread to other fields and revolutionised empirical research.
Canadian economist David Card, using natural experiments, has analysed the labour 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. We now know that the incomes of people who were born in a country can benefit from new immigration, while people who immigrated at an earlier time risk being negatively affected. We have also realised that resources in schools are far more important for students’ future labour market success than was previously thought.
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Data from a natural experiment are 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. 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, Israeli economist Joshua Angrist and Dutch researcher Guido Imbens solved this methodological problem, demonstrating how precise conclusions about cause and effect can be drawn from natural experiments.
Prize amount: 10 million Swedish kronor (990 000 euros), with one half to David Card and the other half jointly to Joshua Angrist and Guido Imbens, according to the press release.