A top Massachusetts Institute of Technology labor economist claimed a share of the 2021 Nobel Prize for Economics Monday for his work in advancing “natural experiments,” which apply economic theories to real-life scenarios as a way of studying cause-and-effect relationships.
Joshua D. Angrist was awarded the prize for a body of work stretching across decades that has sought to answer the complex questions at the crux of modern political discussion through the lens of proven research.
“It’s just the greatest honor a person could have,” Angrist said at a virtual press conference Monday afternoon. “It’s a high point of my life.”
He shares half the coveted award with Stanford University economist Guido W. Imbens, with whom Angrist worked on a portion of the research that was lauded by the prize committee Monday morning at a conference in Stockholm.
University of California Berkeley economist David Card, another of Angrist’s collaborators, took home the other half of the prize for pioneering research on the minimum wage and immigration.
Angrist was asleep when the prize committee called him from Sweden, he said, and woke up to a flood of messages from colleagues. He cut a family vacation to Cape Cod short to return to his home in Brookline upon learning of his win.
“I can hardly believe it,” he said. “It’s only been a few hours and I am still trying to absorb it.”
The award acknowledges Angrist’s empirical research seeking to answer questions about groups of people who are separated by societal variables like inherited wealth or education level.
His attempt to quantify the fiscal benefits of education was conducted in collaboration with the late Alan B. Krueger using what’s called a natural experiment, the type of study he and his fellow prize winners are credited with helping rapidly advance.
In that experiment, Angrist and Krueger compared people who had marginally different levels of education because of varying state laws regarding the age at which students could drop out of school and drew a correlation to their lifetime financial earnings. To do so, they had to isolate certain societal variables that could also have an impact on income. The pair concluded that a year’s difference in education resulted in a roughly 9 percent gap in income.
In explaining his work, Angrist pointed to the ongoing debate surrounding the influence of charter schools on educational outcomes. Each societal circumstance of public school and charter school students must be taken into account, he said.
“That’s a hard question to answer,” he said, “because the people who go to charter schools are making a choice. And sometimes they’re also subject to a screening process that involves [an] application and maybe eventually a lottery. So those are all sort of confounders, we would say.”
With the Dutch-born Imbens, Angrist helped lay a reliable, transparent framework for empirical research such as natural experiments, the prize committee said.
Card, the other prize winner, used natural experiments to challenge long-held theories in labor economics. A 1994 paper written with Krueger rejected the notion that a higher minimum wage would lower employment rates. They came to that conclusion through research on fast food restaurants close to the border of Pennsylvania and New Jersey after the minimum wage in New Jersey was raised.
Card also used empirical research to conclude that immigrants have little impact on the employment levels of less educated workers.
Angrist has served as a Ford International Professor of Economics at MIT for more than a decade. Before joining the institute, he was a faculty member at Hebrew University in Israel. Raised in Pittsburgh, Angrist finished high school a year early and worked at a state mental hospital before attending college.
He later studied economics at Oberlin College in Ohio before earning a master’s degree and a doctorate from Princeton University.
“I did have sort of a winding road,” he said. “I wasn’t a precocious high school student.”
His colleagues at MIT celebrated his work as “groundbreaking.”
“His rigorous empirical approach to using the tools of economics, especially ‘natural experiments,’ to understand and help address important real-world problems exemplifies the finest tradition of the department,” MIT president L. Rafael Reif wrote in a note to students, faculty, and staff.
Nobel Prize winners in economics receive a gold medal and roughly $1.14 million.
Material from the Associated Press was used in this report.