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Offsetting Behavior and the Benefits of Safety Regulations

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Author Info
John C. Hause
Abstract

The net effect of policies to reduce harm to potential victims is sometimes much smaller than the predicted effect because of failure to account for victim offsetting behavior (OB). A simple expected accident loss model is developed where one parameter, the coefficient of diminishing returns, measures quantitatively the marginal offset to the direct policy. The model should be useful in empirical efforts to estimate the OB effect. The article also obtains precise conditions under which OB more than offsets the direct policy effect, shows that stronger risk aversion increases the relative size of OB, and discusses welfare implications of OB. (JEL D18, D61, J28, K32, L51) Copyright 2006, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ei/cbj041
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Publisher Info
Article provided by Oxford University Press in its journal Economic Inquiry.

Volume (Year): 44 (2006)
Issue (Month): 4 (October)
Pages: 689-698
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Handle: RePEc:oup:ecinqu:v:44:y:2006:i:4:p:689-698

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Related research
Keywords:

Find related papers by JEL classification:
D18 - Microeconomics - - Household Behavior - - - Consumer Protection
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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This page was last updated on 2008-9-20.

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