Net Discount Rates Research Articles

A Reply to “Staggered Wage Net Discount Rates: Comment”

Abstract In the comment by Krueger (2018), several guidelines are drawn from the Baumann and Schap (2018) analysis of wage net discount rates (WNDRs). This reply provides clarification on some of the guidelines.

Staggered Wage Net Discount Rates:Accounting for Possibly “Sticky” Wages

Abstract Schap, Baumann and Guest (Journal of Forensic Economics December 2014) report the time-series properties of wage net discount rates for the period 1981.01-2012.12, formulated on the basis of contemporaneously observed wage growth rates and various discount rates (determined by yields on U.S. Treasury notes of differing maturities). Gerald D. Martin (Determining Economic Damages, various editions) has noted the relatively rapid response of interest rates to economic stimuli compared with that of wages, which, being somewhat institutionally driven, respond with a lag. Of course, Martin was not the first to observe or mention these phenomena, but he does relate the phenomena specifically to the suitability of forensic economic application of wage net discount rates as typically derived (i.e., using contemporaneously observed wage growth rates and discount rates). The present study takes account of wage growth rates influenced by possible institutional factors by lagging the time frame of their observation relative to discount rates when the two are combined to form what we term “staggered” wage net discount rates. The staggered net rates constructed for the post-1980 era are then examined for stationarity and magnitude. The choice of lag structure for the staggering is empirically determined, but in conjunction with lag durations suggested by the macroeconomics literature on “sticky” wages. The reported results should be of interest to forensic economists that use wage net discount rates as well as critics of their use.

Medical Net Discount Rates: Updated and Re-examined

Abstract1 Schap, Guest and Kraynak (2013) examines time series properties of medical net discount rates (MNDRs) based on three different, short-term Treasury securities. The article finds attributes of stationarity in each of the series examined and notes greater support for total offset of interest rates and medical cost growth rates than does previously published research. The present study makes four adjustments to Schap, Guest and Kraynak (2013). First, the data set is updated by two years and four months. Second, the t-test applied in the original study and also used in earlier studies of total offset fails to account for autocorrelated error terms, so a substitute test is applied to both the original data set and the newly extended data set, with results reported. Third, Phillips-Perron testing is conducted in addition to Augmented Dickey-Fuller and Kwiatkowski-Phillips-Schmidt-Shin testing of stationarity of the various series analyzed, with results reported. Finally, Zivot-Andrews testing is applied diagnostically, to identify stationary sub-series of MNDRs, similar to an approach used successfully to identify stationary sub-series of wage net discount rates (Schap, Baumann and Guest, 2014). The data analysis suggests two options available to practicing forensic economists who endorse the use of Treasury securities of short duration in formulating MNDRs. One option is to use total offset (i.e., a zero MNDR), based on modestly favorable empirical support in the period 1981:01 to 2014:10. The alternative option would be to rely on a body of evidence amassed over a shorter time frame, from 2001:01 to 2014:10, but which has remarkably strong stationarity properties and yields MNDRs between minus 1.5 and minus 2.0% (i.e., an implicit forecast of medical cost growth exceeding the discount factor).

Are Mexican Net Discount Rates Stationary? An Application for Lost Earnings Damages Involving Undocumented Workers

AbstractThis paper provides empirical evidence on the behavior of various Mexican Net Discount Rates (NDRs) by examining the time series properties of several yields on Mexican government securities and annual wages for nine industrial sectors. Results indicate that NDRs are characterized as a stationary series around a shift in its mean. The forecast for the mean of the NDRs should be based on the period after the time of the shift, which took place in 1994. The discussion addresses relevant case law and the application of the NDR approach to the calculation of damages for Mexican undocumented workers as an effort to equip forensic economists with the tools to conduct such estimates.

Total Offset and Medical Net Discount Rates: 1981–2012

Abstract Medical net discount rates (MNDRs) are calculated using monthly data for the period 1981:01–2012:06 based on the medical consumer price index and annual percentage yields based on 3-month, 6-month and 1-year U.S. Treasury Securities. Stationarity is tested for each series and the results of time-series analytics through 2000:05 are compared to previously published results (Ewing, Payne and Piette, 2001) that omitted Treasury Securities of shortest duration. The various series are extended to 2012:06 and the time series properties are examined. Although the results are mixed, they are more supportive of total offset (i.e., a zero MNDR) than previously published research findings have been.

Foreign Net Discount Rates: The Case of Undocumented Mexican Workers

While undocumented immigrants have standing to sue in state and federal courts in the United States, the number of legal cases dealing with the question of measuring damages awards is limited. Although the approaches taken by courts differ widely, a common past approach has involved foreclosing damages recovery to undocumented workers. Some courts, however, have allowed damages awards based on wages in the undocumented worker's country of origin. As the issue of how to correctly estimate damages of undocumented workers arises going forward, it is reasonable to expect that forensic economists will be required to estimate damages awards based on foreign wages. As an effort to equip forensic economists with the tools to conduct such estimates, this paper addresses the issue for the case of Mexican undocumented workers. First, the paper reviews developing case law on the subject. Second, based on official sources, time series data on interest rates and Mexican annual wages by industry since 1980 are investigated and reported. Third, the historical net discount rate (NDR) is discussed and proposed as a methodology to estimate damage awards. Fourth, NDR stability is discussed. The paper concludes by summarizing the findings and offering concluding comments.

Neighbors of Casino San Pablo v. Ken SalazarNo. 09-2384, 2011 U.S. Dist. LEXIS 33639 (D.D.C., March 30, 2011)

Gaming Law Review and EconomicsVol. 15, No. 7-8 Neighbors of Casino San Pablo v. Ken SalazarNo. 09-2384, 2011 U.S. Dist. LEXIS 33639 (D.D.C., March 30, 2011)Published Online:9 Aug 2011https://doi.org/10.1089/glre.2011.15715AboutSectionsPDF/EPUB Permissions & CitationsPermissionsDownload CitationsTrack CitationsAdd to favorites Back To Publication ShareShare onFacebookTwitterLinked InRedditEmail FiguresReferencesRelatedDetailsCited byGovernment as a Market Player to Improve Consumer Access to Lifesaving Drugs for a Healthy Budget and Healthy CareSSRN Electronic JournalPolicing Boilerplate: Reckoning and Reforming Rule 344s Popular Yet Problematic ConstructionSSRN Electronic Journal'Power and Greed and the Corruptible Seed': Mental Disability, Prosecutorial Misconduct, and the Death PenaltySSRN Electronic JournalForeign Net Discount Rates: The Case of Undocumented Mexican WorkersSSRN Electronic Journal Volume 15Issue 7-8Jul 2011 InformationCopyright 2011, Mary Ann Liebert, Inc.To cite this article:Neighbors of Casino San Pablo v. Ken SalazarNo. 09-2384, 2011 U.S. Dist. LEXIS 33639 (D.D.C., March 30, 2011).Gaming Law Review and Economics.Jul 2011.495-501.http://doi.org/10.1089/glre.2011.15715Published in Volume: 15 Issue 7-8: August 9, 2011PDF download

Predicting Net Discount Rates: A Comparison of Professional Forecasts, Time-series Forecasts and Traditional Methods

AbstractPrevious research proposed two future net discount rate estimators that improved on naïve long-term average and random walk estimators. The proposed estimators were superior in the class of estimators that used only current and past observations on net discount rates. In this paper we consider two extensions. First we examine whether professional forecasts perform significantly better than the two alternatives. Second, we examine the properties and performance of multivariate estimators that account for the potentially differing time-series behaviors of the underlying wage growth and interest rate series.

Ford v. RDI/Caesars Riverboat Casino, LLC, 503 F. Supp. 2d 839 (W.D. Ky. 2007)

Gaming Law ReviewVol. 12, No. 1 CASESFord v. RDI/Caesars Riverboat Casino, LLC, 503 F. Supp. 2d 839 (W.D. Ky. 2007)Published Online:26 Feb 2008https://doi.org/10.1089/glr.2008.12112AboutSectionsPDF/EPUB Permissions & CitationsPermissionsDownload CitationsTrack CitationsAdd to favorites Back To Publication ShareShare onFacebookTwitterLinked InRedditEmail FiguresReferencesRelatedDetailsCited byThe Americans with Disabilities Act and the Constitution of the United States (Dissertation)SSRN Electronic JournalNational Security Lawyering in the Post-War Era: Can Law Constrain Power?SSRN Electronic JournalJudicial Reward Allocation for Asymmetric SecretsSSRN Electronic JournalAdversarial FailureSSRN Electronic JournalThe Law and Social Psychology of Racial Disparities in School DisciplineSSRN Electronic JournalAn Overview of the United States’ Section 230 Internet ImmunitySSRN Electronic Journal, Vol. 4863696Judicial Candidates' Right to LieSSRN Electronic JournalSex Trafficking Exceptions to Section 230SSRN Electronic JournalStays Pending Appeal: Why the Merits Should Not MatterSSRN Electronic JournalPermanent Injunctions in Patent Litigation After eBay: An Empirical StudySSRN Electronic Journal, Vol. 13Religious Accommodations for County Clerks?SSRN Electronic JournalA Statute Overtaken by Time: The Need to Re-Interpret Federal Rule of Evidence 803(8)(a)(iii) Governing the Admissibility of Expert Opinions in Government Investigative ReportsSSRN Electronic Journal, Vol. 191The Law and Economics of Data and Privacy in Antitrust AnalysisSSRN Electronic JournalSchrrdinger's ConstitutionSSRN Electronic JournalForeign Net Discount Rates: The Case of Undocumented Mexican WorkersSSRN Electronic JournalThe Past and Future of Deinstitutionalization LitigationSSRN Electronic JournalSet in Stone? Change and Innovation in Consumer Standard Form ContractsSSRN Electronic JournalSocial Enterprise: Choice of Legal EntitySSRN Electronic JournalWriting Reform: A Guide to Drafting State & Local Campaign Finance Laws (2010 Revised Edition)SSRN Electronic Journal, Vol. 101Guantánamo Habeas Review: Are the D.C. District Court’s Decisions Consistent with IHL Internment Standards?SSRN Electronic JournalThe Brand X Liberation: Doing Away with Chevron’s Second Step as Well as Other Doctrines of DeferenceSSRN Electronic JournalStatins and Adverse Cardiovascular Events in Moderate Risk Females: A Statistical and Legal Analysis with Implications for FDA Preemption ClaimsSSRN Electronic Journal, Vol. 360Michelle Obama: Intersectionality, Implicit Bias, and Third-Party Associative Discrimination in the 2008 ElectionSSRN Electronic JournalThe Looming Collapse of Restrictions on Judicial Campaign SpeechSSRN Electronic JournalInstructional Materials and ‘Works Made for Hire’ at Universities: Policies and Strategic Management of Copyright OwnershipSSRN Electronic JournalAIDS Caps, Contraceptive Coverage, and the Law: An Analysis of the Federal Anti-Discrimination Statutes' Applicability to Health InsuranceSSRN Electronic Journal Volume 12Issue 1Feb 2008 Information© 2008 Mary Ann Liebert, Inc.To cite this article:Ford v. RDI/Caesars Riverboat Casino, LLC, 503 F. Supp. 2d 839 (W.D. Ky. 2007).Gaming Law Review.Feb 2008.77-81.http://doi.org/10.1089/glr.2008.12112Published in Volume: 12 Issue 1: February 26, 2008PDF download

How Much Confidence Do We Have in Estimates of Future Net Discount Rates?

A recent survey by Brookshire, et. al., (2006) suggests that forensic economists are mixed in their use of current versus historical data to estimate future net discount rates.1 Typically the choice is between a long-term average or simply the current prevailing rate.2 Cushing and Rosenbaum (2006) proposed an estimator that optimally uses the information in the past behavior of net discount rates to forecast future rates. Their optimal estimator is a weighted average of the current and long-term mean net discount rates with weights that depend on the degree of persistence in the net discount rate process and on the horizon over which one wishes to forecast future rates. Noting the practical impediments to calculating such an estimator, they proposed an alternate compromise estimator that equally weights the current net discount rate with a long-term average net discount rate. In this paper we extend that analysis by developing confidence intervals for the current, long-term average, optimal and compromise estimators. In particular, we develop both analytic and bootstrap estimates of 50% confidence intervals for all four estimators. The 50% boundary demarcates values that are more likely than not to occur. This serves two purposes. One is to shed light on error rates as is called for in Daubert (1993). The other is to help establish a reasonable degree of economic certainty in our net discount rate predictions. Results show that the boundaries vary by estimator and by forecast horizon. However, in almost all cases, the boundaries are within two percentage points of the point estimates. These boundaries generally narrow as the horizon increases. For the optimal and compromise estimators, the boundaries approach the point estimate plus or minus about one percentage point for a 20year horizon and beyond. Additional results show that the boundaries have remained quite stable over time, regardless of the estimator. Combining these results with earlier findings, the best range of predictions for the future net

On the Time Series Properties of Medical Net Discount Rates

We examine the time series properties of medical net discount rates based on five different medical consumer price indices, namely, medical care, medical services, medical care commodities, physician's services, and prescription drugs & medical supplies that were first analyzed by Ewing, Piette, and Payne (2003). Unlike Ewing, Piette, and Payne (2003), we test for the presence of a unit root in these series using statistics that allow for a break in the trend function at an unknown date, and find that all series are tend-break stationary. Therefore, practitioners should use medical net discount rate forecasts based on the estimated trend function in the post-break periods to calculate the present value of future medical costs.

Correction

<scp>Correction</scp>

Forecasting Medical Net Discount Rates

AbstractDetermining the present value of future medical costs is an important issue for a variety of public and private entities. This article examines the time‐series properties of medical net discount rates and considers the implications for forecasting. The article provides evidence that the standard autoregressive moving average forecasting model may be improved by modeling the time‐varying volatility characteristics of the medical net discount rates.

A Further Examination Regarding the Stability of The Net Discount Rate

Abstract No abstract available.

Accounting for Age-Earnings Profiles in Net Discount Rates

Abstract No abstract available.

Calculating Net Discount Rates: It's Time To Recognize Structural Changes

Abstract No abstract available.

Legislatively Imposed Net Discount Rates: Minnesota's Tort Reform

Abstract No abstract available.