Compensation in personal injury cases: mean or median income?

Leif Danziger, Eliakim Katz

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


Courts typically base compensation for loss of income in personal injury cases on either mean or median work income. Yet, quantitatively, mean and median incomes are typically very different. For example, in the US, median income is 65% of mean income. In this paper we use economic theory to determine the relation between the appropriate make-whole (full) compensation and mean and median work incomes. Given that consumption uncertainty associated with compensation generally exceeds that associated with work income, we show that the appropriate make-whole compensation exceeds mean (and therefore median) work income. Hence, if the compensation must be either the mean or the median work income, then mean work income should generally be selected.

Original languageEnglish
Pages (from-to)291-303
Number of pages13
JournalEuropean Journal of Law and Economics
Issue number2
StatePublished - 15 Oct 2019


  • Compensation
  • Income loss
  • Personal injury
  • Risk aversion
  • Uncertainty

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Law


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