Estimating the Present Value of Future Income Losses: An Historical Simulation 1900-1982

The purpose of this paper is to compare the "Alaska" method of evaluating future income losses with two alternatives and a benchmark. The benchmark is a perfect foresight estimate of the minimum cost of financing real income maintanence for a representative individual over future periods of 5, 12, and 30 years. The approach is via historical simulation over the period 1900-1982. The "Alaska" method is found to be the best although none of the methods performs very well in an absolute sense. The results support the search for an alternative to the single payment method of compensating for income loss.