3 won the Nobel for economics for social research

Canadian-born David Card of the University of California, Berkeley, was awarded half the prize for his research into how the minimum wage, immigration and education affect the labor market.

The other half was shared by Joshua Angrist of the Massachusetts Institute of Technology and Dutch-born Guido Imbens of Stanford University for their framework for studying issues that traditional scientific methods cannot rely on.

The Royal Swedish Academy of Sciences stated that all three “completely replaced empirical work in economic science”.

In a study published in 1994, Card looked at what happened to jobs at Burger King, KFC, Wendy’s, and Roy Rogers when New Jersey raised its minimum wage from $4.25 to $5.05, as a control- or comparison-group. Used restaurant in eastern Pennsylvania border. . Contrary to previous studies, he and his research partner Alan Krueger, who died in 2019, found that the increase in the minimum wage had no effect on the workforce.

Card’s minimum wage research radically changed the views of economists about such policies. As noted by The Economist magazine, a 1992 survey of members of the American Economic Association found that 79% agreed that the minimum wage law increased unemployment among young and low-skilled workers. Those ideas were largely based on traditional economic ideas of supply and demand: if you raise the price of something, you get less of it.

By 2000, however, only 46% of AEA members said that minimum wage laws lead to an increase in unemployment, largely due to research by Card and Kruger. Their findings sparked interest in further research into why a higher minimum would not reduce employment. One conclusion was that companies are able to pass on the cost of higher wages to customers by raising prices. In other cases, if a company was a major employer in a particular sector, it may have been able to keep a particularly low wage so that it could pay a higher minimum without cutting jobs.

The card also found that those who are native-born workers may benefit from new immigrants, while earlier immigrants are at risk of being negatively affected. To study the impact of immigration on jobs, Card compared the labor market in Miami to that of Cuba’s sudden decision to emigrate in 1980, which forced 125,000 people to move there, known as the Mariel Boatlift. Began to be known This resulted in a 7% increase in the city’s workforce. By comparing wage and employment growth in four other cities, the card found no negative effects for Miami residents with lower levels of education.

Angrist and Imbens won half their prize for work on methodological issues, which allow economists to draw firm conclusions about cause and effect, even if they cannot study according to strict scientific methods.

Card work at the minimum wage was an example of a “natural experiment” or a study based on observation of real-world data. The problem with such experiments is that it can sometimes be difficult to separate cause and effect. Imbens and Angist, however, developed statistical methods to address these challenges and determine more precisely what could actually be said about the causes and effects of natural experiments.

The award comes with a gold medal and 10 million Swedish kronor (over $1.14 million). Unlike other Nobel Prizes, the Economics Prize was not established in the will of Alfred Nobel, but was established in 1968 in his memory by the Swedish central bank, with the first winner being chosen a year later. This is the last award announced each year.