Economists receive the Nobel Prize for important life experiments

All three laureates work in US universities – Canadian Kard at the University of California, Berkeley, US and Israeli dual citizen Angrist – Massachusetts Institute of Technology, Dutch and US dual citizen Imbens – Stanford University.

A new approach

They “have given us a new understanding of the labor market and shown what conclusions about cause and effect can be drawn from natural experiments. Their approach is being used in other areas and has revolutionized empirical research, ”the academy said in a statement.

Card has analyzed the impact of the labor economy on minimum wages, immigration and education through natural experiments. Angrist and Imbens have solved methodological problems by demonstrating how accurate conclusions about causes and effects can be obtained from real-life situations that resemble random experiments.

As early as the 1990s, Kārds studied various stereotypes related to the labor market. He managed to prove that raising the minimum wage does not always lead to fewer jobs. It was generally believed that paying more would not be able to hire as many employees.

Real life instead of a laboratory

The researcher, along with his colleague Alan Krieger, who passed away in 2019, used data from two US neighbors, New Jersey and Pennsylvania. In the first of 1992, the minimum hourly rate was increased from $ 4.25 to $ 5.05. In Pennsylvania, everything remained the same.

Economists calculated the difference between employment rates in New Jersey before and after the minimum wage change and then the same in Pennsylvania.

In another study, Card found that the massive settlement of Cuban immigrants in Miami did not lead to a drop in wages or an increase in unemployment compared to similar places.

These studies refute the notion that, unlike physics, chemistry, or biology, economics does not allow for controlled experiments with reliable conclusions. This must even be done by assessing in good time the consequences of a new tax, benefits or raising the retirement age.

The longer you study, the more you earn

Angrist and Alan Krieger have discovered the impact of education on income. Depending on the state, American children can graduate from school in 16 or 17 years. According to the country as a whole, all those born in one year start in the first grade together.

Those born later can finish high school even two years earlier than their peers born a few months earlier.
Economists studied how it affects graduates’ incomes in the big life. It turned out that those who studied longer earn on average more, and the difference can reach nine percent.

In 1994, Angrist and Imbens proved that in economics, causes and effects can be seen mathematically and, in addition, clear results can be distinguished from the effects of chance. The works of all three economists complement each other, and Krieger would also receive the Nobel Prize if he were still among them. The amount of the bonus is ten million Swedish kronor (approximately one million euros). Half will be given by Card, the other half will be divided by his two colleagues.

Nobel Prizes will be awarded on the basis of merit, not gender

Nobel Prizes will not have a gender quota, said Jānis Hansons, Secretary of the Swedish Academy of Sciences.

He emphasizes that the academy wants people to win the award because they have made the most significant discovery, not because of gender or ethnicity. “Ultimately, we will award the prize to those who are considered the most worthy, to those who have made the most important contribution,” Hanson said.

Philippine journalist Maria Resa is the only woman to win a Nobel Prize this year. She was awarded the Peace Prize together with Dmitry Muratov, editor-in-chief of the Russian newspaper Novaya Gazeta, for their efforts to protect freedom of expression.

“It is sad that there are so few women Nobel laureates, and this reflects the unjust conditions in society, especially in previous years,” Hanson said, stressing that much remains to be done.

“Keep in mind that only about 10% of science professors in Western Europe and North America are women, and even fewer in East Asia,” says Hanson. “We need a different attitude towards women in science (…) so that they can make these discoveries, which are rewarded.”

Latvia has the second highest proportion of women in science and engineering in the European Union – in 2019 53%, while in the bloc an average of 41%. Lithuania was the first with 55 percent.

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