London, Oct 11 (IANS): Three US academicians from prestigious universities were on Monday conferred the Nobel Prize for Economics for their contribution in adopting the techniques of clinical trials to understand the impact of cause and effect in economic phenomenon, especially the labour market and its dynamics.
The Royal Swedish Academy of Sciences announced that the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2021, or the Economics Nobel, goes to Economics Professors David Card, "for his empirical contributions to labour economics" and Joshua D. Angrist and Guido W. Imbens "for their methodological contributions to the analysis of causal relationships".
While Card, 65, Professor of Economics at the University of California, Berkeley, will get half of the 10 mn Swedish kronor ($1.14 mn) prize amount, the other half will be shared between Angrist, 61, the Ford Professor of Economics at the Massachusetts Institute of Technology, and Imbens, 58, the Applied Econometrics Professor and Professor of Economics at Stanford University.
According to the Society, the cause and effect relationship underlines key questions in social sciences, particularly economics, say effect on education on future earning capacity. However, finding answers is tricky due to lack of comparison - in this case, the effect of not continuing education, but the three 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," it said.
The approach of the laureates has spread to other fields and revolutionised empirical research, the Academy said.
Card has used natural experiments to analyse the labour market effects of minimum wages, immigration and education, and 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," an Academy statement said.
However, it noted that data from a natural experiment are difficult to interpret. Taking the example of education, it can be seen that the results may differ for various members of a group. And here came Angrist and Imbens, who in the mid-1990s, "solved this methodological problem, demonstrating how precise conclusions about cause and effect can be drawn from natural experiments".
"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," Economic Sciences Prize Committee Chair Peter Fredriksson said.