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InvestmentsEconomics Nobel honours 'natural experiments', from minimum wage to migration By Reuters

Economics Nobel honours ‘natural experiments’, from minimum wage to migration By Reuters

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¬© Reuters. Royal Swedish Academy of Sciences Secretary General Goran Okay. Hansson and members of the academy’s Economic Sciences Prize Committee 2021 Peter Fredriksson and Eva Moerk announce the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2021 as images of the winners David Card, Joshua Angrist and Guido Imbens are introduced on a display screen throughout a information convention on the academy, in Stockholm, Sweden, October 11, 2021. Claudio Bresciani/TT News Agency/by way of REUTERS ATTENTION EDITORS – THIS IMAGE WAS PROVIDED BY A THIRD PARTY. SWEDEN OUT. NO COMMERCIAL OR EDITORIAL SALES IN SWEDEN.

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By Simon Johnson and Niklas Pollard

STOCKHOLM (Reuters) – Economists David Card, Joshua Angrist and Guido Imbens gained the 2021 Nobel economics prize on Monday for pioneering “natural experiments” to present real-world financial impacts in areas from minimum wage will increase within the U.S. fast-food sector to migration from Castro-era Cuba.

Unlike in drugs or different sciences, economists can’t conduct rigidly managed medical trials. Instead, pure experiments use real-life conditions to research impacts on the world, an strategy that has unfold to different social sciences.

“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 Committee.

Past Nobel Economics prizes have been dominated by U.S. establishments and this was no exception. Canada-born Card presently works on the University of California, Berkeley; Angrist, a twin U.S. and Israeli citizen, at Massachusetts Institute of Technology; and Dutch-born Imbens at Stanford University.

‘VERY NUTS-AND-BOLTS’

One experiment by Card, 65, on the influence on the fast-food sector of a minimum wage improve within the U.S. state of New Jersey within the early Nineteen Nineties upended typical knowledge in economics that such will increase ought to at all times lead to job losses.

His work on the subject, typically in collaboration with distinguished economist, Alan Krueger, who died in 2019, has been used as empirical proof to push for laws, together with by the Biden administration, for a $15 minimum wage within the United States.

Another studied the influence of a transfer by Fidel Castro in 1980 to enable all Cubans who wished to go away the nation to achieve this. Despite excessive ensuing migration to Miami, Card discovered no unfavorable wage or labour results for Miami residents with low ranges of schooling.

“It’s about trying to get more scientific tie-in and evidence-based analysis in economics,” Card, who initially thought his mates have been enjoying a sensible joke when he obtained the decision from Sweden, advised Berkeley’s web site following the announcement. “Most old-fashioned economists are very theoretical, but these days, a large fraction of economics is really very nuts-and-bolts.”

Steve Pischke, a professor of economics on the London School of Economics, who studied underneath Card, stated the influence of the three researchers’ work in utilizing pure experiments has been far-reaching.

“It’s been absolutely huge,” Pischke stated. “Everyone was getting very influenced by this and I think… research started to be done very differently and it spread to many fields of economics where these methods are now routinely used.”

‘ABSOLUTELY STUNNED’

The Nobel committee famous that pure experiments have been troublesome to interpret, however that Angrist and Imbens had, within the mid-Nineteen Nineties, solved methodological issues to present that exact conclusions about trigger and impact may very well be drawn from them.

“I was just absolutely stunned to get a telephone call, then I was just absolutely thrilled to hear the news,” Imbens, 58, stated on a name with reporters in Stockholm, including he was delighted to share the prize with two of his good mates. Angrist, 61, was finest man at his wedding ceremony.

The prize, formally often known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, is the final of this yr’s crop of Nobels and sees the winners share a sum of 10 million Swedish crowns ($1.14 million).

The prestigious prizes for achievements in science, literature and peace have been created and funded within the will of Swedish dynamite inventor and rich businessman Alfred Nobel.

They have been awarded since 1901, although the economics prize – created by a donation from Sweden’s central financial institution on its three hundredth anniversary – is a later addition that was first handed out in 1969.

While the economics award has tended to stay within the shadow of the customarily already well-known winners of the prizes for peace and literature, laureates through the years embrace various massively influential economists, such because the Austrian-British Friedrich August von Hayek and American Milton Friedman.

($1 = 8.7275 Swedish crowns)

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