Nobel economics prize jointly awarded to labour market expert David Card

A labour market expert whose work influenced the introduction of the UK’s minimum wage has been named as a joint winner of the Nobel economics prize.

David Card, a Canadian-born economist, was one of three US-based academics given the prestigious award for their work on whether economic theory is supported by real-life situations.

The trio – Card, Joshua Angrist, an American, and Guido Imbens, from the Netherlands – were cited for their work on natural experiments, which is said to have revolutionised empirical research.

Card, who received half the 10m Swedish kronor (£838,000) prize fund, made his name with a paper that studied whether an increase in New Jersey’s minimum wage from $4.25 to $5.25 an hour in 1992 cost jobs in the fast-food industry.

Contrary to previous research, Card and his fellow economist Alan Krueger found that employment in New Jersey restaurants increased after the minimum wage was raised.

The widely cited paper was seized on by Gordon Brown and his then economics adviser Ed Balls to justify their plans for a UK national minimum wage, which was introduced in 1999. Although there is now cross-party support for the minimum wage, it was initially opposed by the Conservatives on the grounds that it would cost jobs.

Krueger, who worked in Barack Obama’s government, died in 2019 before his work could be honoured.

Card’s other work has included a study of how a sharp increase in migration from Cuba to Miami affected wages and employment after Fidel Castro’s decision in 1980 to allow people to leave Cuba.

In a four-month period, 125,000 Cubans arrived in Miami, raising the size of the workforce by 7%, but a comparison with four other US cities found no deleterious effects on jobs or wages of low-paid workers.

Angrist and Imbens, who shared the other half of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, won praise for their work on the relationship between education and income, such as the impact on income of an extra year in school.

One of the panel responsible for making the award, Eva Mörk of Uppsala University, said: “Many important questions are about cause and effect. Will people become healthier if their income increases; do lockdowns reduce the spread of infections? This year’s laureates have shown that it is still possible to answer these broad questions about cause and effects and the way to do that is to use natural experiments.”

Prizes for peace, literature and science have been awarded since 1901 as a result of a fund created by the will of the inventor of dynamite, Alfred Nobel. The prize for economists was made possible by a donation from Sweden’s central bank and first awarded in 1969.

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