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The Effect of the Loss of a Parent on the Future Earnings of a Minor Child

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Abstract

We quantify the effect of a parent's absence on a child's future earnings. A parent's absence because of separation or divorce reduces a child's lifetime earnings between 3 and 12 percent. Lifetime educational attainment is adversely affected by between 2 and 4 percent if a parent of the same gender as the child dies (a smaller impact than if absence is because of separation or divorce). No such adverse effect is found if a girl's father or a boy's mother dies. We conclude that it is sensible that lifetime earnings loss to children not be estimated in a parent's wrongful death case.

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Notes

  1. See Tinari [1998] and Ireland and Depperschmidt [1999].

  2. While the courts may look for guidance from an economist to determine the effect of the death of a parent on a child's future earnings, a recent federal case rejected such an attempt in a Daubert Challenge based on the plaintiff's economist's estimate of the minor child's lost potential income being too “attenuated and speculative to be reliable under Daubert.” See Kallas v Carnival Corporation. Case No. 06-20115-Civ-Moreno/Torres, United States District Court for the Southern District of Florida 2009 US Dist. LEXIS 33797.

  3. They did not consider the timing of the parental divorce.

  4. The only exception was that children of mothers who were single due to death of the child's father had slightly lower odds of completing high school.

  5. The most recent papers in the forensic economic literature are Jepsen and Jepsen [2001] and Kane and Spizman [2001]. The reference sections of these papers list earlier papers in the forensic economics literature and papers in the general economics journals.

  6. This specification differs slightly from that used in Spizman and Kane [1992] and in Kane and Spizman [2001] in that the initial threshold value is specified as θ1 instead of zero. This alternative specification is becoming more common in the literature, partly as a result of its adoption in the Stata statistical software package. The two alternative specifications are equivalent. The current specification, however, does not contain a separate constant term (the estimated value of θ1 is the negative of the constant term in the earlier specification).

  7. For a complete discussion of the development of the ordered probit model first used by forensic economists, see Spizman and Kane [1992].

  8. Gill and Foley [1996] first utilized the 1979–1992 waves of this survey in their update and expansion of the Spizman-Kane [1992] model. Kane and Spizman [2001] used the 1979–1998 waves of this survey in their analysis.

  9. The Spizman and Kane [1992] model was estimated using a sample of 7,862 participants in the National Longitudinal Study of the High School Class of 1972. Gill and Foley [1996] used a sample of 7,207 observations from the NLSY79. The Kane and Spizman [2001] model was estimated using a sample of 7,023 individuals.

  10. The dummy variable Biological Mother only is defined to equal one (1) if the biological mother is present and the biological father is absent (an equivalent interpretation holds for the Biological Father Only variable). This variable equals one (1) regardless of the presence or absence of another adult partner in the household.

  11. The Other variable used in this analysis reflects a wide variety of cases, including individuals who were adopted, living with foster parents, in group homes, in correctional facilities, with stepparents (and no biological parents), with friends, with other relatives, or on their own at the age of 14 years. While the effect of each of these living arrangements on the respondent's educational attainment is likely to be different, none of these categories contains a large enough sample to analyze, separately.

  12. Thus, deaths of parents that occurred between the 1979 and 1980 surveys are not reflected in this variable unless the respondent did not complete this section of the 1979 survey. This variable indicates that the parent died at some time between the respondent's conception (or birth, in the case of female parents) and 1979 (and in a few cases in 1980). Given the age of NLSY79 respondents, this means that the parent died before the child reached an age of between 14 and 21 years (depending on the age of the respondent at the start of the NLSY79 survey).

  13. Normally Table 2 would be used as part of a questionnaire to get data from the plaintiff. In the unlikely situation where the plaintiff does not know an answer to Table 2, then the missing variables can be filled with the sample mean for those variables (to capture the “average” outcome). For example, in the unlikely event that it was unknown whether the male plaintiff child lived in an urban area, the mean value of 0.780 from Table 2 could be used in combination with the coefficient of 0.051 from Table 3 to assign a value of 0.03978 (=0.780 × 0.051).

  14. This simplification is for expository reasons for the purpose of this paper. Normally, age earning profiles would be used in an actual case.

  15. This assumption reduces the number of scenarios in this paper. Under normal circumstances, the proper gender work life table is used. However, there are some circumstances (for example, when dealing with professional females with an established work history) in which the male work life table may be appropriate.

  16. As with the above assumptions, the no discounting assumption is made to simplify the presentation of this paper. Discounting is a legal question and some jurisdictions require it while others do not.

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Kane, J., Spizman, L., Rodgers, J. et al. The Effect of the Loss of a Parent on the Future Earnings of a Minor Child. Eastern Econ J 36, 370–390 (2010). https://doi.org/10.1057/eej.2010.25

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