Abstract

Abstract The methodology of using a net discount rate (“NDR”) to calculate the present value of future labor earnings is now over 50 years old. First found in public health economics, the earnings NDR later reached forensic economics where it was adapted to other calculations such as the present value of medical costs. At first, some forensic economists embraced the historically determined wage NDR arguing that it was simple, fair, and 0% since annual wage growth and interest rates had been fairly equal to that time. The 0% wage NDR did not sit well with some other forensic economists, and so a discourse began in the literature regarding its numeric value. Largely missing from the debate has been an analysis of the historically determined NDR, as it has been constructed and used, as a legitimate present value methodology. Building upon the initial criticisms of the NDR by Jones (1985, 1986) and the recent work of Foster (2015), this article examines the historical wage NDR method and concludes that, for several reasons, it is theoretically faulty, empirically inconsistent, and not relevant to forensic economics.

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.