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The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities

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  • Cohen, Alma
  • Dehejia, Rajeev

Abstract

This paper investigates the incentive effects of automobile insurance, compulsory insurance laws, and no-fault liability laws on driver behavior and traffic fatalities. We analyze a panel of 50 U.S. states and the District of Columbia for 1970-98, a period in which many states adopted compulsory insurance regulations and/or no-fault laws. Using an instrumental variables approach, we find evidence that automobile insurance has moral hazard costs, leading to an increase in traffic fatalities. We also find that reductions in accident liability produced by no-fault liability laws have led to an increase in traffic fatalities (estimated to be on the order of 6 percent). Overall, our results indicate that, whatever other benefits they might produce, increases in the incidence of automobile insurance and moves to no-fault liability systems have significant negative effects on traffic fatalities.

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Bibliographic Info

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

Volume (Year): 47 (2004)
Issue (Month): 2 (October)
Pages: 357-93

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Handle: RePEc:ucp:jlawec:y:2004:v:47:i:2:p:357-93

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References

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  1. Aaron S. Edlin, 1999. "Per-Mile Premiums for Auto Insurance," NBER Working Papers 6934, National Bureau of Economic Research, Inc.
  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.
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  6. J. David Cummins & Mary A. Weiss & Richard D. Phillips, 1999. "The Incentive Effects of No Fault Automobile Insurance," Center for Financial Institutions Working Papers 99-38, Wharton School Center for Financial Institutions, University of Pennsylvania.
  7. Alma Cohen & Liran Einav, 2003. "The Effects of Mandatory Seat Belt Laws on Driving Behavior and Traffic Fatalities," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 828-843, November.
  8. Steven D. Levitt & Jack Porter, 2001. "Sample Selection In The Estimation Of Air Bag And Seat Belt Effectiveness," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 603-615, November.
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  12. Steven Shavell, 1982. "On Liability and Insurance," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 120-132, Spring.
  13. Michelle J. White, 1989. "An Empirical Test of the Comparative and Contributory Negligence Rules in Accident Law," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 308-330, Autumn.
  14. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 541-62, November.
  15. Peltzman, Sam, 1975. "The Effects of Automobile Safety Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 677-725, August.
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  17. Viscusi, W. Kip, 1996. "Fatal Tradeoffs: Public and Private Responsibilities for Risk," OUP Catalogue, Oxford University Press, number 9780195102932, September.
  18. Sloan, Frank A. & Reilly, Bridget A. & Schenzler, Christoph M., 1994. "Tort liability versus other approaches for deterring careless driving," International Review of Law and Economics, Elsevier, vol. 14(1), pages 53-71, March.
  19. Steven Shavell, 2000. "On the Social Function and the Regulation of Liability Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 25(2), pages 166-179, April.
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Citations

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Cited by:
  1. Dhaval Dave & Robert Kaestner, 2009. "Health insurance and ex ante moral hazard: evidence from Medicare," International Journal of Health Care Finance and Economics, Springer, vol. 9(4), pages 367-390, December.
  2. Steven D. Levitt, 2005. "Evidence that Seat Belts are as Effective as Child Safety Seats in Preventing Death for Children Aged Two and Up," NBER Working Papers 11591, National Bureau of Economic Research, Inc.
  3. van der Star, Sanne M. & van den Berg, Bernard, 2011. "Individual responsibility and health-risk behaviour: A contingent valuation study from the ex ante societal perspective," Health Policy, Elsevier, vol. 101(3), pages 300-311, August.
  4. Daniel Carvell & Janet Currie & W. Bentley MacLeod, 2009. "Accidental Death and the Rule of Joint and Several Liability," NBER Working Papers 15412, National Bureau of Economic Research, Inc.
  5. Jusot, Florence & Grignon, Michel & Buchmueller, Tom, 2007. "Unemployment and Mortality in France, 1982-2002," Economics Papers from University Paris Dauphine 123456789/7024, Paris Dauphine University.
  6. Loureiro, Maria L., 2008. "Liability and food safety provision: Empirical evidence from the US," International Review of Law and Economics, Elsevier, vol. 28(3), pages 204-211, September.
  7. Alma Cohen & Peter Siegelman, 2010. "Testing for Adverse Selection in Insurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 39-84.
  8. Michael J. Roberts & Erik O'Donoghue & Nigel Key, 2014. "Separating Moral Hazard from Adverse Selection: Evidence from the U.S. Federal Crop Insurance Program," Working Papers 201410, University of Hawaii at Manoa, Department of Economics.
  9. Yilma, Zelalem & van Kempen, Luuk & de Hoop, Thomas, 2012. "A perverse ‘net’ effect? Health insurance and ex-ante moral hazard in Ghana," Social Science & Medicine, Elsevier, vol. 75(1), pages 138-147.
  10. Sun, Stephen Teng & Yannelis, Constantine, 2013. "Quantifying the Premium Externality of the Uninsured," MPRA Paper 54638, University Library of Munich, Germany.
  11. Yannelis, Constantine & Sun, Stephen Teng, 2013. "The Real Effects of the Uninsured on Premia," MPRA Paper 48264, University Library of Munich, Germany.
  12. 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.
  13. Beth A. Freeborn & Brian McManus, 2010. "Substance Abuse Treatment and Motor Vehicle Fatalities," Southern Economic Journal, Southern Economic Association, vol. 76(4), pages 1032-1048, April.
  14. Kolko, Jed, 2007. "Dialing While Fishtailing: How Mobile Phones, Hands-Free Laws, and Driving Conditions Interact to Affect Traffic Fatalities," MPRA Paper 4135, University Library of Munich, Germany.
  15. 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 Finanças, Getulio Vargas Foundation (Brazil).
  16. Hultkrantz, Lars & Nilsson, Jan-Eric & Arvidsson, Sara, 2012. "Voluntary internalization of speeding externalities with vehicle insurance," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(6), pages 926-937.
  17. Daniel P. Kessler & Daniel L. Rubinfeld, 2004. "Empirical Study of the Civil Justice System," NBER Working Papers 10825, National Bureau of Economic Research, Inc.

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