David Card, Joshua D. Angrist, and Guido W. Imbens, winners of the 2021 Nobel Prize in Economics
The 2021 Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel was awarded half to David Card (Berkeley) and half to Joshua D. Angrist (MIT) and Guido W. Imbens (Stanford) for their work on the labor market based on natural experiments.
The great contribution of these economists was the application of experimental economics in the analysis of labor market dynamics and in the evaluation of the impact of public policies. Their work is not theoretical or based on laboratory experiments, but on the observation of real-life situations. These natural experiments are based in particular on the difference-in-differences method, which allows the consequences of a phenomenon to be observed by comparing both the situations before and after the occurrence of an event, but also between a treatment group and a control group.
David Card, who worked with Alan Krueger, used these experiments to show thatan increase in the minimum wage did not automatically lead to a decrease in employment. Their article, published in the early 1990s, caused quite a stir because it challenged the dominant economic theories of the time on the basis of empirical observations. To reach this conclusion, they compared the labor market situation in a geographically homogeneous area along the border between the US states of New Jersey and Pennsylvania. The minimum wage had been increased in New Jersey while remaining the same in Pennsylvania, and this had not had a negative impact on employment in New Jersey. David Card also observed the impact on the labor market of the arrival of 125,000 Cuban immigrants who fled Castro’s regime in 1980.
Joshua Angrist and Guido W. Imbens used the same method to analyze the link between education level and income. By observing a population born in the same year but in different months, they found that people born at the beginning of the year had, on average, completed their education earlier and had lower salaries than people born at the end of the year. They concluded that an additional year of education led to a 9% higher salary. In 2003, they also showed that the rigidity of labor market institutions and the goods and services market led to higher unemployment, by studying Yugoslav immigration to Europe in the 1990s.
Julien Pinter, an economist at BSI Economics, was interviewed on the subject by AFP and was quoted in the international press in Japan, the United States, Switzerland, Uruguay, Peru, Paraguay, Kuwait, and Colombia.
