Title
The Importance of Wage Growth Assumptions in Calculating Economic Damages
Document Type
Article
Publication Date
12-2018
Abstract
This study examines the importance of incorporating age-earnings profiles into the estimation of future earnings. Using data from the 2000 Census of the Population and the 2001-2015 American Community Surveys, we estimate age-earnings profiles for seven different education groups after controlling for period and cohort effects. We compare estimates of the loss in future earnings using the age-earnings profiles versus two popular alternatives: assuming a constant rate of earnings growth across the life-cycle or using cross-sectional data for age groups to estimate wage growth for various age ranges. Our results imply that a failure to incorporate the age-earnings profile into estimates of earnings losses can lead to significant over- or under-statement of losses depending on the age at which the damages begin and the educational attainment of the injured party.
DOI
10.5085/JFE-446
Publisher
National Association of Forensic Economics
Repository Citation
Even, W. E., & MacPherson, D. A. (2018). The importance of wage growth assumptions in calculating economic damages. Journal of Forensic Economics, 27(2), 127-144. https://doi.org/10.5085/JFE-446
Publication Information
Journal of Forensic Economics
