“Raj Chetty is a remarkably productive economist,” the American Economic Association said in a statement announcing the award yesterday. “He has established himself in a few short years as arguably the best applied microeconomist of his generation.”
Chetty, 33, has been a “pioneer” in using large data sets, such as tax returns and education records, in his research, said James Poterba, president of the National Bureau of Economic Research, which is responsible for dating the beginnings and endings of recessions.
The work for which Chetty was honored encompasses tax policy, unemployment and other social insurance, and education. Winners of the Clark medal, awarded annually to an economist under the age of 40, have often gone on to receive the Nobel Prize in Economic Sciences.
In the research Obama cited, Chetty found that “high value-added” teachers can boost the long-run earnings of their kindergarten students.
His December 2011 paper, published with fellow Harvard professor John Friedman and Jonah Rockoff of Columbia University, was also highlighted by New York Mayor Michael Bloomberg in his 2012 State of the City address. Bloomberg is founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.
“I’m very happy to see the evidence showing up in the policy discussion,” Chetty said in a telephone interview, referring to the research on teachers.
He said the “broad theme” underlying his work was to use scientific evidence and data collection to try to analyze important social and economic questions. His current focus, he added, is “on equality of opportunity in America.”
“A lot of my interest is figuring out how we can give kids, especially from disadvantaged backgrounds, better opportunities,” he said.
Chetty received his doctorate in economics from Harvard in 2003, and was awarded the MacArthur Foundation Fellowship, known as the “genius” award, last year. A U.S. citizen, he was born in New Delhi in 1979 and raised after age 9 in the United States.
“I was quite surprised” to hear about the award, Chetty said. “I was having lunch with my wife so it was a nice time to find out,” he added.
Chetty said another theme of his work is the importance of behavioral traits in explaining peoples’ economic decisions.
His research found that workers were more likely to participate in their company’s retirement plans if they were automatically enrolled than if they were simply offered more monetary incentives to join.
“Behavioral economics issues like inattention and inertia tend to be as important as prices and economic incentives,” he said.
In what the association called Chetty’s most cited research, he concluded that retailers would lose business if they posted prices including sales taxes, rather than excluding them, even though consumers were aware of the taxes either way.
His work on unemployment insurance suggested that current benefits may be too low because they fail to take account of the fixed costs that those who lose their jobs face, such as paying a mortgage, according to the association.
“He’s a very versatile, very wide-ranging applied microeconomist,” said Poterba, who also is a professor of economics at the Massachusetts Institute of Technology in Cambridge.
The John Bates Clark medal, started in 1947 as a biennial prize, is now being awarded annually to the young American economist who is judged to have made “the most significant contribution to economic thought and knowledge,” according to the association.
It is named after the U.S. economist, who died in 1938 after spending most of his career teaching at Columbia University in New York.
Past winners of the award include the late Milton Friedman, New York Times columnist and Princeton University professor Paul Krugman, and Lawrence Summers, former director of President Barack Obama’s National Economic Council.
“It’s a great honor to be on this list,” Chetty said.
Data compiled by Bloomberg show that recipients of the medal have about a one-in-three chance of eventually winning the Nobel Prize in economics.
Amy Finkelstein, a professor at the Massachusetts Institute of Technology, won the medal last year for her work on the economics of health care.
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