A Closer Look at Race, Ethnicity, and Gender Neutral Models

What the paper says

Abstract Litigation cases involving the expected earnings of minor children provide an ideal environment to examine the implications of public policies that attempt to mitigate racial, ethnic, and gender discrimination in the calculation of economic damages. This paper extends the existing literature on the implications of race, ethnicity, and gender neutral models by evaluating both educational attainment probabilities and estimated lifetime earnings within educational attainment categories. Recent related studies have focused on the educational attainment portion of the calculation only. We perform thousands of simulations of a child’s lifetime earnings using neutral estimations—a proxy for removing discrimination—and compare those estimates to ones in which race, ethnicity, and gender are taken into account. We find wide variation within racial and ethnic groups when earnings are incorporated into the analysis, consistent with prior research. Importantly, however, our findings pertain primarily to females, suggesting that interactions between gender and race and ethnicity are an added complexity. The practical implication of our findings is that neutral models can adversely impact individual members of protected groups. The results provide further guidance to policymakers who might be interested in the real-world outcomes associated with legislation that restricts how economists calculate economic damages.