Answering Causal Questions Using Observational Data - Achievements of the 2021 Nobel Laureates in Economics

Zoltan Hermann, Hedvig Horvath () and Attila Lindner ()
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Hedvig Horvath: University College London
Attila Lindner: University College London

Financial and Economic Review, 2022, vol. 21, issue 1, 141-163

Abstract: In the 1980s and 1990s, the field of labour economics was at the forefront of combining economic theory, high-level econometric methods and new data sources. The 2021 Nobel Prize in Economics was awarded to David Card, Joshua Angrist and Guido Imbens, who played key roles in this research, for their "empirical contributions to labour economics" (Card) and "methodological contributions to the analysis of causality relationships" (Angrist and Imbens), according to the citation. These methodological innovations are now applied in all fields of economics and in many other social science disciplines. Credible empirical analysis has transformed economics from a rather theoretical discipline into a discipline dominated by empirical results, where even the most fundamental theories can be rejected on the basis of empirical results. In this paper, we review the main methodological achievements of this period, also known as the credibility revolution, illustrated by some economic applications.

Keywords: natural experiment; minimum wage; returns to education; instrumental variables; difference-in-differences; regression discontinuity design (search for similar items in EconPapers)
JEL-codes: C2 C26 I21 I26 J2 J6 (search for similar items in EconPapers)
Date: 2022
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