The 2019 Nobel Prize in Economics recognises a revolution in development economics
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2019, commonly known as the “Nobel Prize in Economics”, has just been awarded to Abjijit Banerjee (MIT), Esther Duflo (MIT) and Michael Kremer (Harvard), three researchers who have contributed to the renewal of development economics by using randomised experiments. According to Professor Dominic Rohner and Professor Mathias Thoenig from HEC Lausanne (UNIL), the research carried out by these three exceptional winners has had a profound impact on their field of study and more generally, on social sciences research.
Economic sciences have undergone a real revolution in the last 30 years or so. Thanks to the increasing prevalence of large databases and increasingly powerful computers, a discipline that was previously heavily theoretical has been transformed into a fundamentally empirical science, which is interested in identifying regularities and their causes. Today, over two thirds of the articles published in the field are based on this methodological approach.
Development economics offers an excellent illustration of the changes that have taken place, in examining issues of poverty and public interventions aimed at reducing it. Until the 1990s, researchers’ main area of interest was on the effect of major development policies, implemented either nationally or internationally (such as investment in infrastructure, education, industrial policy, etc.). The downside of this highly aggregated approach was that it did not allow a detailed assessment of their effectiveness, for one simple but fundamental methodological reason: what level and kind of poverty should be used as a point of comparison for the results of the policy concerned?
Now, economists assess projects and interventions on a smaller scale, over a defined period of time and in a specific geographical area. The aim of the approach is to produce a rigorous evaluation of their impact at the microeconomic level: the measures assessed as most promising are then rolled out on a larger scale. Professors Banerjee and Duflo, for example, have studied the impact of building schools in Indonesia, or electoral quotas for women in India, while Professor Kremer has analysed the impact of disinfestation projects in various poor regions.
This type of methodology for evaluating public policies is also applied by teachers and researchers at HEC Lausanne, in areas including conflict (Mathias Thoenig, Dominic Rohner and Elena Esposito), development economics (Elena Esposito, Jürgen Maurer and Rafael Lalive) and education (Camille Terrier). Several grants have also been secured to develop research in these areas, including from the European Research Council (ERC) for Professors Rohner and Thoenig, the Sandoz grant for Professor Esposito, and R4D grants for Professor Maurer. The work of the three leading researchers awarded the Nobel Prize for Economics 2019 is a real source of inspiration for all these projects. Finally, the award of a Nobel Prize to Esther Duflo, as a young female researcher, is in line with the policy of promoting women’s careers at UNIL and within the School.
What is the randomisation method?
This method generally takes the form of a “randomised” experiment (or randomised controlled trial), similar to those used in the natural sciences, such as medicine or the pharmaceutical industry. Applying the method in economic sciences involves using a representative sample of villages or households, some of which receive the intervention (the “treatment group”) while the rest receive nothing (the “control group”). Assignment to the two groups is random and is a crucial methodological tool that produces clear and rigorous statistical evidence of the effects of the intervention.
par HEC communication