The IZA Prize in Labor Economics 2006 goes to David Card and Alan B. Krueger

The most renowned research prize in labor economics
Research focus on education policy and return on investment in education

Bonn, 11/08/2006, 10:30 AM CET

Two U.S. economics professors, David Card and Alan B. Krueger, share this year's IZA Prize in Labor Economics. Card researches and teaches at the University of California, Berkeley, and Krueger at Princeton University, New Jersey. The scholarly award has been given annually since 2002 from the Bonn-based Institute for the Study of Labor (IZA), which Deutsche Post significantly supports. The award is one of the most renowned prizes in the academic world and, with EUR50,000 in prize money, also one of the most well endowed. IZA Director Prof. Dr. Klaus F. Zimmerman and Deutsche Post CEO and IZA President Dr. Klaus Zumwinkel awarded the prize.

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IZA President Klaus Zumwinkel, Alan B. Krueger, David Card and IZA Director Klaus F. Zimmermann (from the left).

Laureates David Card and Alan B. Krueger deal with, among other things, the effects of education policy and immigration on the job market as well as trade unions' influence on wage levels - topics of particular importance in the current debate on poverty in Germany. Even though their research predominately focuses on the United States, there are important insights to be gained for German policies as well. "In particular, the two laureates' analyses of education and the return on investment in education are very important for German labor-market policy," Zumwinkel said.

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Alan B. Krueger and David Card (from the left).

Card and Krueger's research is cutting-edge in the area of education policy. Their main finding: Whoever attends a good school with small class sizes, extensive classroom hours and motivated teachers, expands his or her career chances later in life and markedly improves his or her prospective income. Even children who do not have wealthy parents or who come from difficult homes can compensate for their disadventageous start in life with a good school. Financial investments into schools in problem areas also pays off. If these schools are equipped with more money, pupils fare better in their later careers. For this reason, public investment into the education system also translates into a measurable return on investment for the state. "This is a definite pointer for German education policy," IZA Director Zimmermann said.

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The event took place at the museum of communication in Berlin.

In other research, Card and Krueger have proven that the declining rate of unionization in the United States was followed by a greater wage spread, with the scale widening in both directions - upward and all the way down to minimum wage. In addition, David Card has been able to demonstrate in pertinent studies that immigration does not have any long-term negative effects on the labor market.

The IZA Prize in Labor Economics 2006 recognizes the groundbreaking research of two exceptional scientists while underlining the strong relevance of labor economics to a target-oriented labor-market policy.

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