Three US-based economists have received this yr’s Nobel Prize for his or her work on real-world experiments that challenged obtained concepts, together with by displaying that elevating minimal wages needn’t damage jobs and that immigration doesn’t all the time reduce pay for native-born employees.
David Card, who’s a professor on the College of California, Berkeley, shared the prize with Massachusetts Institute of Expertise professor Joshua Angrist and Stanford College professor Guido Imbens for his or her central position in growing the so-called “design-based” strategy in economics to reply central questions for society.
The committee awarding the prize, formally often known as the Sveriges Riksbank Prize in Financial Sciences in Reminiscence of Alfred Nobel, mentioned the three males “revolutionised empirical analysis” by utilizing pure experiments — real-life conditions the place likelihood occasions or coverage selections create comparable circumstances to these of a medical trial.
Card, born in Canada in 1956, used these pure experiments to analyse points such because the impact of minimal wages on jobs, the influence of immigration on wages and employment, in addition to the returns that individuals get from schooling by way of subsequent earnings and different labour market outcomes.
One among Card’s most influential research, performed within the early 1990s, in contrast what occurred to fast-food employees within the adjoining US states of Pennsylvania and New Jersey, after the latter launched the next minimal wage. Opposite to the then prevailing knowledge, he discovered the upper wage didn’t damage jobs, and would possibly even have boosted employment. The findings prompted additional analysis within the US and world wide; in consequence, many international locations raised their minimal wage.
Card additionally triggered a rethinking of the results of immigration, by his work analysing the results of the 1980 Mariel boatlift on Miami’s labour market. It confirmed {that a} sudden inflow of 125,000 Cubans had no damaging results on wages or employment for low-skilled Miami residents, even because it elevated the town’s labour pressure by 7 per cent.
The Nobel Prize committee mentioned Card’s work “showcased the ability of exploiting pure experiments” and performed a vital position in shifting the strategies of empirical analysis.
One drawback with pure experiments is that they’re typically tougher to interpret than medical trials as a result of researchers don’t select the members and can’t know their motivations. The results of spending extra time in schooling are laborious to evaluate, for instance, as a result of those that select to review longer could already be these most probably to profit from it.
Angrist and Imbens, who’re shut associates and colleagues, shared half of this yr’s prize due to their methodological work in tackling this drawback, the committee mentioned.
Analyzing questions such because the impact of army service on earnings later in life, they developed a framework displaying how exact conclusions about trigger and impact may very well be drawn from pure experiments. The committee mentioned this had “remodeled” utilized work, and was now extensively utilized in economics, and more and more in different social sciences, epidemiology and medication.
Card — who initially thought the cellphone name from the Nobel committee was a sensible joke — maintained in feedback printed by the College of California, Berkeley that his contributions had been “fairly modest”.
“Most elderly-fashioned economists are very theoretical, however nowadays, a big fraction of economics is actually very nuts-and-bolts, topics like schooling or well being, or on the results of immigration or the results of wage insurance policies,” he mentioned. “These are actually very, quite simple issues. So, my large contribution was to oversimplify the sector.”
