The Royal Swedish
Academy of Sciences has decided to award the Sveriges Riksbank
Prize in Economic Sciences in Memory of Alfred Nobel 2021 with
one half to David Card, University of California, Berkeley, USA
“for his empirical contributions to labour economics” and the
other half jointly to Joshua D. Angrist, Massachusetts Institute
of Technology, Cambridge, USA and Guido W. Imbens, Stanford
University, USA “for their methodological contributions to the
analysis of causal relationships”
Many of the big questions in the social sciences deal with cause
and effect. How does immigration affect pay and employment
levels? How does a longer education affect someone’s future
income? These questions are difficult to answer because we have
nothing to use as a comparison. We do not know what would have
happened if there had been less immigration or if that person
had not continued studying.
However, this year’s Laureates have shown that it is possible to
answer these and similar questions using natural experiments.
The key is to use situations in which chance events or policy
changes result in groups of people being treated differently, in
a way that resembles clinical trials in medicine.
Using natural experiments, David Card has analysed the labour
market effects of minimum wages, immigration and education. His
studies from the early 1990s challenged conventional wisdom,
leading to new analyses and additional insights. The results
showed, among other things, that increasing the minimum wage
does not necessarily lead to fewer jobs. We now know that the
incomes of people who were born in a country can benefit from
new immigration, while people who immigrated at an earlier time
risk being negatively affected. We have also realised that
resources in schools are far more important for students’ future
labour market success than was previously thought.
Data from a natural experiment are difficult to interpret,
however. For example, extending compulsory education by a year
for one group of students (but not another) will not affect
everyone in that group in the same way. Some students would have
kept studying anyway and, for them, the value of education is
often not representative of the entire group. So, is it even
possible to draw any conclusions about the effect of an extra
year in school? In the mid-1990s, Joshua Angrist and Guido
Imbens solved this methodological problem, demonstrating how
precise conclusions about cause and effect can be drawn from
“Card’s studies of core questions for society and Angrist and
Imbens’ methodological contributions have shown that natural
experiments are a rich source of knowledge. Their research has
substantially improved our ability to answer key causal
questions, which has been of great benefit to society,” says
Peter Fredriksson, chair of the Economic Sciences Prize
David Card, born 1956 in Guelph, Canada. Ph.D. 1983 from
Princeton University, USA. Class of 1950 Professor of Economics,
University of California, Berkeley, USA.
Joshua D. Angrist, born 1960 in Columbus, Ohio, USA. Ph.D.
1989 from Princeton University, USA. Ford Professor of Economics,
Massachusetts Institute of Technology, Cambridge, USA.
Guido W. Imbens, born 1963 in Eindhoven, Netherlands.
Ph.D. 1991 from Brown University, Providence, USA. The Applied
Econometrics Professor and Professor of Economics, Stanford
Prize amount: 10 million Swedish kronor, with one half to David
Card and the other half jointly to Joshua Angrist and Guido