Orley Ashenfelter, Distinguished Fellow 2007

Orley Ashenfelter is a leading scholar in modern labor economics and law and economics. He broke new ground in analyses concerning trade unions, wages and employment, labor supply, discrimination, education and training, and dispute resolution. Perhaps even more importantly, his work has influenced a generation of researchers in empirical microeconomics to value credible identification strategies, and has led to the widespread adoption of classical experimental designs to evaluate economic policies.

Ashenfelter’s early work focused on the economic analysis of trade unions. His papers on strike activity and trade union growth attracted attention for their use of neoclassical reasoning and econometrics in a field that had been the province of institutional approaches. His classic paper on racial discrimination in trade unions ended a heated debate about whether unions improved the lot of African-American men (they did). His work on unions led to an interest in dispute resolution, and he developed frameworks for identifying efficient bargains, and analyzing the determinants and resolution of disputes.

In the 1970s, the analysis of labor supply emerged as a central issue. In work with James Heckman, Ashenfelter extended neoclassical theory to model family decision-making and derived testable implications of the "unitary household model". He went on to develop a framework for distinguishing between voluntary and involuntary unemployment, both theoretically and empirically. He won the 1984 Frisch prize for: "Unemployment as Disequilibrium in a Model of Aggregate Labor Supply".

In 1972 Ashenfelter served as Director of the Office of Evaluation in the U.S. Department of Labor and became interested in measuring the effectiveness of training programs. In a 1978 paper, he developed the now ubiquitous "difference-in-difference" method for measuring program effects. These methods are now also widely used to assess the validity of "natural experiments" by, for example, determining whether treatments and controls are well matched. He also noted the phenomena of "Ashenfelter's dip," the idea that earnings often fall just prior to entering a training program, which complicates measurement of treatment effect.

Ashenfelter was an early champion of experimental research in economics, both in the lab, and in large-scale social experiments. Work by Ashenfelter and his students challenged the profession to focus on identification strategies that were as close as possible to the ideal of a randomized experiment and have led to new developments in econometrics. His pathbreaking papers measuring the returns to education using specially collected data on twins, highlighted the potential value to economists of such data. This later work was highlighted when he was awarded the 2003 IZA Prize.

While Ashenfelter's research has had a powerful influence on the field, his chief legacy may be in his role as a mentor to many of today' s leading labor economists. For all these contributions, as well as his service to the profession as Editor of the American Economic Review, founder of The Society of Labor Economists, and co-founder of the American Law and Economics Review. Orley Ashenfelter deserves recognition as a Distinguished Fellow.