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The Incentive Effects of No-Fault Automobile Insurance

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  • Cummins, J David
  • Phillips, Richard D
  • Weiss, Mary A

Abstract

This paper presents a theoretical and empirical analysis of the effects of no-fault automobile insurance on fatal accident rates. As a mechanism for compensating the victims of automobile accidents, no-fault insurance has several important advantages over the tort system. However, by restricting access to tort, no-fault may weaken incentives for careful driving and lead to higher accident rates. We conduct an empirical analysis of automobile accident fatality rates in all U.S. states over the period 1968-94, controlling for the potential endogeneity of no-fault laws. The results support the hypothesis that no-fault is significantly associated with higher fatal accident rates than tort. Copyright 2001 by the University of Chicago.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Law & Economics.

Volume (Year): 44 (2001)
Issue (Month): 2 (October)
Pages: 427-64

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Handle: RePEc:ucp:jlawec:v:44:y:2001:i:2:p:427-64

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  1. Robinson, Chris, 1989. "The Joint Determination of Union Status and Union Wage Effects: Some Tests of Alternative Models," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 639-67, June.
  2. Landes, Elisabeth M, 1982. "Insurance, Liability, and Accidents: A Theoretical and Empirical Investigation of the Effect of No-Fault Accidents," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 49-65, April.
  3. J. David Cummins & Sharon Tennyson, 1992. "Controlling Automobile Insurance Costs," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 95-115, Spring.
  4. Ian Mcewin, R., 1989. "No-fault and road accidents: Some Australasian evidence," International Review of Law and Economics, Elsevier, vol. 9(1), pages 13-24, June.
  5. Phillip Farrell & Victor R. Fuchs, 1981. "Schooling and Health: The Cigarette Connection," NBER Working Papers 0768, National Bureau of Economic Research, Inc.
  6. Peltzman, Sam, 1975. "The Effects of Automobile Safety Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 677-725, August.
  7. Cummins, J David & Tennyson, Sharon, 1996. "Moral Hazard in Insurance Claiming: Evidence from Automobile Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(1), pages 29-50, January.
  8. Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-33, June.
  9. Devlin, Rose Anne, 1990. "Some welfare implications of no-fault automobile insurance," International Review of Law and Economics, Elsevier, vol. 10(2), pages 193-205, September.
  10. Lave, Charles A, 1985. "Speeding, Coordination, and the 55 MPH Limit," American Economic Review, American Economic Association, vol. 75(5), pages 1159-64, December.
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Cited by:
  1. Dionne, Georges & Michaud, Pierre-Carl & Pinquet, Jean, 2013. "A review of recent theoretical and empirical analyses of asymmetric information in road safety and automobile insurance," Research in Transportation Economics, Elsevier, vol. 43(1), pages 85-97.
  2. Cohen, Alma & Dehejia, Rajeev, 2004. "The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 357-93, October.
  3. Steven Shavell, 2005. "Liability for Accidents," NBER Working Papers 11781, National Bureau of Economic Research, Inc.
  4. Vereeck, Lode & Vrolix, Klara, 2007. "The social willingness to comply with the law: The effect of social attitudes on traffic fatalities," International Review of Law and Economics, Elsevier, vol. 27(4), pages 385-408, December.
  5. Daniel P. Kessler & Daniel L. Rubinfeld, 2004. "Empirical Study of the Civil Justice System," NBER Working Papers 10825, National Bureau of Economic Research, Inc.
  6. Neri, Marcelo Cortes, 2007. "The State of the Youth: Prisons, Drugs and Car Crashes," Economics Working Papers (Ensaios Economicos da EPGE) 661, FGV/EPGE Escola Brasileira de Economia e Finan├žas, Getulio Vargas Foundation (Brazil).
  7. Fenn, Paul & Gray, Alastair & Rickman, Neil, 2007. "Liability, insurance and medical practice," Journal of Health Economics, Elsevier, vol. 26(5), pages 1057-1070, September.
  8. Jonathan Yoder, 2008. "Liability, Regulation, and Endogenous Risk: The Incidence and Severity of Escaped Prescribed Fires in the United States," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 297-325, 05.

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