The Nobel Prize in Economics awarded to a trio of specialists in experimental economics

The Nobel Prize in economics was awarded Monday, October 11, to three specialists in experimental economics, the Canadian David Card, the American-Israeli Joshua Angrist and the American-Dutch Guido Imbens.

The trio “Brought us new ideas in the labor market and showed what conclusions can be drawn from natural experiments”, greeted the Nobel jury. Natural experiments, also called involuntary experiments, are studies conducted in real situations – not in a laboratory, in controlled environments. They thus take advantage of political or economic events that affect a random part of the population.

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Natural experiences

The Canadian David Card, born in 1956, is thus awarded “For his empirical contributions to labor economics”. Using natural experiments, Card analyzed the effects of minimum wages, immigration and education on the labor market. “His studies in the early 1990s challenged preconceived ideas, which led to new analyzes and new perspectives”, according to the Nobel jury.

The economist from Berkeley (California) had particularly studied the “exodus of Mariel”: in 1980, 125,000 Cubans expelled by the regime of Fidel Castro through the port of Mariel settled in the United States, half in Miami. The economist studied how the city of Florida “absorbed” this influx, without exploding unemployment, or plunging wages.

In a similar vein, David Card and his American colleague Alan Krueger (died in 2019) also studied the relationship between minimum wage and employment through a natural experiment in the early 1990s.

To do this, they compared the labor market situation in the border area between the US states of New Jersey and Pennsylvania. The minimum wage had been increased in New Jersey while it had remained the same in Pennsylvania. By focusing their research on a homogeneous geographical area, MM. Card and Krueger have shown that the increase in the minimum wage had no downward effect on the number of employees. This finding ran counter to the prevailing theory of the time, which assumed that an increase in the minimum wage would destroy jobs.

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Methodological contributions

Also collaborating with Alan Krueger, the American-Israeli Joshua Angrist, 61, for his part, was interested in the link between level of education and payslip. He thus compared the time spent in the school system by people born in the same year according to their month of birth.

Those born at the beginning of the year, who therefore had the possibility of leaving school a little earlier than the others, had on average had shorter studies than those born in the last term, and their salaries were lower. This allowed Mr Angrist to determine that a high level of education generally leads to higher salaries – around 9% for an additional year of study.

Joshua Angrist, accompanied by Adriana Kugler, had also shown in 2003 that unemployment increased all the more sharply as the institutions of the labor market and the market for goods and services are rigid, by studying the Yugoslav immigration of the 1990s in Europe.

Dutch-American Guido Imbens, 58, later worked with Angrist to refine the interpretation of these results.

Few laureates

Sometimes referred to as “False Nobel”, the “Bank of Sweden Prize in Economics in Memory of Alfred Nobel” was created by the Swedish Central Bank more than sixty years after the other five (medicine, physics, chemistry, literature and peace).

With only two winners among the 89 recipients of the award (the American Elinor Ostrom in 2009 and the French Esther Duflo ten years later), or 97.7% of men in total, he is the least feminine of the six, so even that it is half a century less than the other prices. It is also largely monopolized by American economists. Last year, for example, the prize thus rewarded the Americans Paul Milgrom and Robert Wilson, two auction experts whose innovative work was notably used in the allocation of telecom frequencies.

The economy comes to end a Nobel season marked in particular by the peace prize to two investigative journalists, the director of the Filipino media Rapper, Maria Ressa, and the editor of the Russian newspaper Novaya Gazeta, Dmitry Muratov.

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