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2021 Nobel Prize in Economics awarded to David Card for proving that increasing the minimum wage does not reduce employment

The winners of the 2021 Nobel Prize in Economics were announced on Monday. The renowned award was awarded this year to three economists: the Canadian David Card, the Dutch Guido Imbens and the American Joshua Angrist.

The Royal Swedish Academy of Sciences announced that the prize of 10 million Swedish crowns (almost one million euros) was awarded to the three economists for having “revolutionized empirical research in the economic sciences”.

The Novel Prize in Economics, established since 1969, will have to be shared among the three winners thanks to their contributions to labor economics and the analysis of causal relationships.

About the discoveries

Canadian economist David Card will receive half the money for analyzing the effects of the minimum wage, immigration and education on the labor market. Their studies showed that, for example, increasing the minimum wage does not necessarily lead to fewer jobs.

These results represent a “better understanding of how the labor market works than 30 years ago,” according to the Academy jury.

Since the 1990s, the idea has prevailed that a high minimum wage leads to a lower employment rate because wage costs for companies increase. However, David Card and his late colleague Alan Krueger concluded that the negative effects of this increase are residual.

Card’s studies have also contributed to the field of education and its impact on the future success of students in the job market. Their results once again questioned popular wisdom: according to previous research, the relationship between increased resources and school performance, as well as job opportunities, was weak.

Contrary to popular belief, Card’s studies revealed that those papers did not consider a compensatory allocation of resources. The Canadian economist’s studies did consider this possible impact of the media on students’ future job success.

David Card, and his late partner, compared the educational level of people in the same city but who grew up in different states within the US The purpose was to compare their training in childhood and adolescence to observe the investment they made in each place.

The results of their studies were revealing as they found that even student achievement increases with teacher density. These findings have inspired new studies today. “There is relatively strong empirical support to show that investments in education influence later success for students, especially those from disadvantaged backgrounds.”

The award was also awarded to the American Joshua Angrist and the Dutch-American Guido Imbens “for their methodological contributions to the analysis of causal relationships.”

The economists were able to demonstrate how cause-effect conclusions can be drawn from natural experiments or situations that arise in real life.

His methodology has been used by other researchers who work with observational data and for randomized experiments in which there is no total control over who participates in the intervention.

A peculiarity of the three winners of the Nobel Prize in Economics is that they all work at American universities: Card in Berkeley, Angrist at the Massachusetts Institute of Technology and Imbens in Stanford. In addition, two of them have a US passport.

This year’s edition closes with the absence of women. It should be noted that only the Philippine journalist Maria Ressa has managed to be on the list of winners for her work on freedom of the press and her denunciations of the abuse of power in the Philippines.


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