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With the help of natural experiments, this year's Economics Prize winners have shown that it is possible to answer difficult questions about cause and effect, such as how longer education affects a person's future salary.
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”They have influenced many people’s views on how research can be conducted”

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This year's Prize in Economic Sciences is awarded to David Card, Joshua Angrist and Guido Imbens, who receive the prize for having shown how to draw conclusions about cause and effect based on natural experiments and for providing new insights about labour markets and education. A selection of laureates that Mikael Lindahl, professor of economics at the School of Business, Economics and Law, is pleased with.

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Porträtt av Mikael Lindahl
Mikael Lindahl, professor i nationalekonomi.
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I think it is absolutely right and actually a bit overdue that this research is rewarded. Their research has great significance both within and outside academia. They try to provide answers regarding the effects of different policies where it is not possible to randomize who is being treated, which is usually the case. Their contribution began as an analysis of issues concerning the labour market and education, but has spread to, among other things, development economics, public economics and also to other areas, such as political science,” Mikael Lindahl says.

A new way to approach causal questions

David Card, Joshua Angrist and Guido Imbens' research concerns cause and effect and tries to answer questions about for example the effects of immigration on employment and wages, or in what way longer education affects a person’s future salary. Since there is in those cases nothing to compare with, these are questions that are difficult to answer.

But this year’s economics laureates show that with so-called natural experiments you can still investigate and answer these and other similar questions. Their method uses situations where chance or policy changes have led to groups of people being treated in different manners, in a way that is actually similar to randomized clinical trials in, for example, medicine.

”Their research is based on statistical methods that are quite easy to use. Therefore, it has been of great importance for the understanding of how results are produced and have been used widely by researchers, but also by non-researchers in, for example, government agencies. Although their results, such as Card’s research on minimum wages, have been widely disseminated, I think they deserve the award above all for the methods they use, where their careful research designs started what has been labelled 'the credibility revolution' in applied economic research. It is also very good that the prize committee so clearly mentions Alan Krueger, who made very important early contributions, often together with David Card and Joshua Angrist”, Mikael Lindahl says.

But there are also other perspectives on the prize winners' research. Stefan Öberg, researcher in Economic History, critizises the selection of laureates:

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Stefan Öberg, researcher in economic history.

"I am critical of how the methods advocated by Joshua Angrist and Guido Imbens have been used and not least of how the results have been interpreted. In my view, especially Joshua Angrist has over-interpreted the results so that they have become misleading and I find that their methods have been used as a technical solution without enough attention being paid to the connection to the reality behind the data; how and why the methods work. I have analyzed one of their methods and the literature that uses it, and find that almost all studies over- or misinterpret their results. This is a big problem due to how much the methods are used and the weight given to results based on it", he says.

Challenged established truths

David Card’s studies from the early 1990s, using natural experiments, challenged previously established truths, and showed, among other things, that raising the minimum wage does not have to lead to fewer jobs and that those born in a country often benefit economically from new immigration, while those who have immigrated earlier are at risk of being negatively affected.

Joshua Angrist and Guido Imbens contributed in the mid-90s to solving methodological problems on how the results of natural experiments can be interpreted and showed what conclusions about cause and effect can be drawn from them.

”The prize winners have influenced many people’s views on how research can be conducted and I and many with me use their methods. I have, for example, used them together with Andreea Mitrut to evaluate the effects of fighting corruption in schools in Romania, how parents’ education affects the education of their children in Sweden, and how school resources affect school results in the Netherlands,” says Mikael Lindahl.