Valuing Household Services: A New Look at the Replacement Cost Approach

Economists are called upon to assess the loss of household services in personal injury and wrongful death cases. One frequently used method for doing this is to value the labor hours spent on household services at market wage rates. A less often used alternative values the actual services produced at retail market prices. This paper develops a new technique for valuing services at retail prices. It then investigates the relative divergence between the wage rate and retail price approaches. The analysis indicates that valuing the actual retail services produced generates estimates significantly larger than those generated by valuing labor hours.