London Daily

Focus on the big picture.
Wednesday, Oct 22, 2025

Nobel Economics Prize: What Are "Natural Experiments?"

Nobel Economics Prize: What Are "Natural Experiments?"

Nobel Economics Prize: The work of David Card, Joshua Angrist and Guido Imbens, who were awarded the Nobel Prize in Economics on Monday, is based on "natural experiments", an innovative method of empirical research developed in the 1990s.

The work of David Card, Joshua Angrist and Guido Imbens, who were awarded the Nobel Prize in Economics on Monday, is based on "natural experiments", an innovative method of empirical research developed in the 1990s.

Natural experiments are real-life situations that economists study and analyse to determine cause-and-effect relationships.

In some ways they are similar to clinical trials, in which researchers evaluate the effectiveness of new drugs by separating test and control groups at random.

"We are replicating something that could be done in a laboratory," says Julien Pinter, a researcher at the University of Minho in Portugal and an economist at BSI Economics.

But doing something in the controlled conditions of a laboratory and doing it out in the world are two very different things.

Natural experiments differ from therapeutic trials in that -- unlike scientists in the lab -- economists do not control the parameters of the experiment.

The scope of these studies is vast: in the cases of the Nobel winners, they covered education, the labour market and immigration.

Challenging preconceptions


For example, Canadian David Card and his American colleague, the late Alan Krueger, who died in 2019, studied the relationship between the minimum wage and employment in the early 1990s.

They compared the labour markets on both sides of the border between the US states of New Jersey, where the minimum wage had been increased, and Pennsylvania, where it had not.

Their research showed that, in that context, the minimum wage increase had no downward effect on the number of employees.

That finding went against the prevailing theory at the time, which assumed that an increase in the minimum wage would destroy jobs as it would make it more expensive for companies to do business.

More school, more income


Card also studied the relationship between immigration and the labour market using another case study: the 1980 settlement of tens of thousands of Cubans in Miami, Florida, who had been allowed to leave the island by President Fidel Castro.

The economist's work showed that this wave of new arrivals did not have a negative impact on employment.

Also collaborating with the late Alan Krueger, American-Israeli Joshua Angrist looked at the link between education and income.

He compared the time spent in the education system by people born in the same year according to their month of birth.

Those born at the beginning of the year -- who therefore had the opportunity to leave school a little earlier -- had on average a shorter education than those born later in the year.

They also had lower wages.

This allowed Angrist to determine that higher levels of education generally led to higher wages.

Dutch-American Guido Imbens subsequently worked with Angrist to refine the interpretation of those results.

Newsletter

Related Articles

0:00
0:00
Close
Apple Challenges EU Digital Markets Act Crackdown in Landmark Court Battle
Nicolas Sarkozy begins five-year prison term at La Santé in Paris
Japan stocks surge to record as Sanae Takaichi becomes Prime Minister
This Is How the 'Heist of the Century' Was Carried Out at the Louvre in Seven Minutes: France Humiliated as Crown with 2,000 Diamonds Vanishes
China Warns UK of ‘Consequences’ After Delay to London Embassy Approval
France’s Wealthy Shift Billions to Luxembourg and Switzerland Amid Tax and Political Turmoil
"Sniper Position": Observation Post Targeting 'Air Force One' Found Before Trump’s Arrival in Florida
Shouting Match at the White House: 'Trump Cursed, Threw Maps, and Told Zelensky – "Putin Will Destroy You"'
Windows’ Own ‘Siri’ Has Arrived: You Can Now Talk to Your Computer
Thailand and Singapore Investigate Cambodian-Based Prince Group as U.S. and U.K. Sanctions Unfold
‘No Kings’ Protests Inflate Numbers — But History Shows Nations Collapse Without Strong Executive Power
Chinese Tech Giants Halt Stablecoin Launches After Beijing’s Regulatory Intervention
Manhattan Jury Holds BNP Paribas Liable for Enabling Sudanese Government Abuses
Trump Orders Immediate Release of Former Congressman George Santos After Commuting Prison Sentence
S&P Downgrades France’s Credit Rating, Citing Soaring Debt and Political Instability
Ofcom Rules BBC’s Gaza Documentary ‘Materially Misleading’ Over Narrator’s Hamas Ties
Diane Keaton’s Cause of Death Revealed as Pneumonia, Family Confirms
Former Lostprophets Frontman Ian Watkins Stabbed to Death in British Prison
"The Tsunami Is Coming, and It’s Massive": The World’s Richest Man Unveils a New AI Vision
Outsider, Heroine, Trailblazer: Diane Keaton Was Always a Little Strange — and Forever One of a Kind
Dramatic Development in the Death of 'Mango' Founder: Billionaire's Son Suspected of Murder
Two Years of Darkness: The Harrowing Testimonies of Israeli Hostages Emerging From Gaza Captivity
EU Moves to Use Frozen Russian Assets to Buy U.S. Weapons for Ukraine
Europe Emerges as the Biggest Casualty in U.S.-China Rare Earth Rivalry
HSBC Confronts Strategic Crossroads as NAB Seeks Only Retail Arm in Australia Exit
U.S. Chamber Sues Trump Over $100,000 H-1B Visa Fee
Shenzhen Expo Spotlights China’s Quantum Step in Semiconductor Self-Reliance
China Accelerates to the Forefront in Global Nuclear Fusion Race
Yachts, Private Jets, and a Picasso Painting: Exposed as 'One of the Largest Frauds in History'
Australia’s Wedgetail Spies Aid NATO Response as Russian MiGs Breach Estonian Airspace
McGowan Urges Chalmers to Cut Spending Over Tax Hike to Close $20 Billion Budget Gap
Victoria Orders Review of Transgender Prison Placement Amid Safety Concerns for Female Inmates
U.S. Treasury Mobilises New $20 Billion Debt Facility to Stabilise Argentina
French Business Leaders Decry Budget as Macron’s Pro-Enterprise Promise Undermined
Trump Claims Modi Pledged India Would End Russian Oil Imports Amid U.S. Tariff Pressure
Surging AI Startup Valuations Fuel Bubble Concerns Among Top Investors
Australian Punter Archie Wilson Tears Up During Nebraska Press Conference, Sparking Conversation on Male Vulnerability
Australia Confirms U.S. Access to Upgraded Submarine Shipyard Under AUKUS Deal
“Firepower” Promised for Ukraine as NATO Ministers Meet — But U.S. Tomahawks Remain Undecided
Brands Confront New Dilemma as Extremists Adopt Fashion Labels
The Sydney Sweeney and Jeans Storm: “The Outcome Surpassed Our Wildest Dreams”
Erika Kirk Delivers Moving Tribute at White House as Trump Awards Charlie Presidential Medal of Freedom
British Food Influencer ‘Big John’ Detained in Australia After Visa Dispute
ScamBodia: The Chinese Fraud Empire Shielded by Cambodia’s Ruling Elite
French PM Suspends Macron’s Pension Reform Until After 2027 in Bid to Stabilize Government
Orange, Bouygues and Free Make €17 Billion Bid for Drahi’s Altice France Telecom Assets
Dutch Government Seizes Chipmaker After U.S. Presses for Removal of Chinese CEO
Bessent Accuses China of Dragging Down Global Economy Amid New Trade Curbs
U.S. Revokes Visas of Foreign Nationals Who ‘Celebrated’ Charlie Kirk’s Assassination
AI and Cybersecurity at Forefront as GITEX Global 2025 Kicks Off in Dubai
×