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An Empirical Evaluation of Two Methods for Estimating Economic Damages

James Lambrinos and Oskar R. Harmon
The Journal of Risk and Insurance
Vol. 56, No. 4 (Dec., 1989), pp. 733-739
DOI: 10.2307/253456
Stable URL: http://www.jstor.org/stable/253456
Page Count: 7
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
An Empirical Evaluation of Two Methods for Estimating Economic Damages
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Abstract

This study uses a longitudinal data set, the Panel Study on Income Dynamics, to test the accuracy of several methods of estimating economic losses to individuals. Earnings data are available for workers from 1968 through 1983. Using data from 1968 through 1970, projections are made for 1971 through 1983. Those projections are then compared to the present value of the worker's wages. This represents the first attempt to use a longitudinal data set to evaluate various approaches for estimating earnings losses. The results indicate that an age-earnings adjustment approach produces an estimate of the earnings loss that is more accurate than the offset approach alone. Furthermore, the mean error using this approach is 10,080 while the root mean square error is 70,562.

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