Novelty of the Noble

The Noble laureates of this annum have strikingly molded the perception regarding the phenomenon of minimum wage rate, immigration and education.

David Card (with Krueger) , challenging the traditional lookout (the fact that higher minimum wages reduced employment) has resultantly proved that among other things, increase in the minimum wages does not necessarily lead to fewer jobs; income of the natives can be bettered due to new immigration wherein early immigrants can be at risk of being negatively affected with a positive impact of school resources on future success of students.. Joshua Angrist and Guido Imbens claimed that data from natural experiments are difficult to interpret.

Card and Krueger wanted to check whether there was any difference in the changes in number of workers employed in the cities that were near each other but differed only in the rate of the minimum wage. In addition, Card examined the impact of immigration on the wages and employment of the locals- which he found was “minute”.

As economics is not a “laboratory science” it is often hard to conduct controlled experiments .Instead economists create “natural experiments” ; Angrist and Imbens paved a pathway for establishing the framework for the same by suggesting to use the bordering countries for natural experiments (in case of the States, Card chose Pennsylvania and New Jersey )

Card’s research later paved the way for many states to raise the minimum wage well above the federal floor. Angrist and Imben’s work solved the methodological problems to show that precise conclusions about cause and effect can be drawn from natural experiments.

The above model establishing the causal effect through instrumental variables and local average treatment effect, helped boost the transparency and credibility of empirical research.

Both the researches have again proven the fact that “the change is the only constant” and we as consumers should open mindedly accept the evolving changes while approaching the economy!