London Daily

Focus on the big picture.
Thursday, Jul 31, 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
Former Judge Charged After Drunk Driving Crash Kills Comedian in Brazil
Jeff Bezos hasn’t paid a dollar in taxes for decades. He makes billions and pays $0 in taxes, LEGALLY
China Increases Use of Exit Bans Amid Rising U.S. Tensions
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
Procter & Gamble to Raise U.S. Prices to Offset One‑Billion‑Dollar Tariff Cost
House Republicans Move to Defund OECD Over Global Tax Dispute
Botswana Seeks Controlling Stake in De Beers as Anglo American Prepares Exit
Trump Administration Proposes Repeal of Obama‑Era Endangerment Finding, Dismantling Regulatory Basis for CO₂ Emissions Limits
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
A family has been arrested in the UK for displaying the British flag
Mel Gibson refuses to work with Robert De Niro, saying, "Keep that woke clown away from me."
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
The British propaganda channel BBC News lies again.
Deputy attorney general's second day of meeting with Ghislaine Maxwell has concluded
Controversial March in Switzerland Features Men Dressed in Nazi Uniforms
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
Thai Civilian Death Toll Rises to 12 in Cambodian Cross-Border Attacks
TSUNAMI: Trump Just Crossed the Rubicon—And There’s No Turning Back
Over 120 Criminal Cases Dismissed in Boston Amid Public Defender Shortage
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
Trump Announces $550 Billion Japanese Investment and New Trade Agreements with Indonesia and the Philippines
US Treasury Secretary Calls for Institutional Review of Federal Reserve Amid AI‑Driven Growth Expectations
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Severe Flooding in South Korea Claims Lives Amid Ongoing Rescue Operations
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
CEO Resigns Amid Controversy Over Relationship with HR Executive
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
US Revokes Visas of Brazilian Corrupted Judges Amid Fake Bolsonaro Investigation
U.S. Congress Approves Rescissions Act Cutting Federal Funding for NPR and PBS
North Korea Restricts Foreign Tourist Access to New Seaside Resort
Brazil's Supreme Court Imposes Radical Restrictions on Former President Bolsonaro
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Judge Criticizes DOJ Over Secrecy in Dropping Charges Against Gang Leader
Apple Closes $16.5 Billion Tax Dispute With Ireland
Von der Leyen Faces Setback Over €2 Trillion EU Budget Proposal
UK and Germany Collaborate on Global Military Equipment Sales
Trump Plans Over 10% Tariffs on African and Caribbean Nations
Flying Taxi CEO Reclaims Billionaire Status After Stock Surge
Epstein Files Deepen Republican Party Divide
Zuckerberg Faces $8 Billion Privacy Lawsuit From Meta Shareholders
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
SpaceX Nears $400 Billion Valuation With New Share Sale
×