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

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  • Alma Cohen
  • Rajeev Dehejia

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 from 1970-1998, 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%). 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

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9602.

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Date of creation: Apr 2003
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Publication status: published as Cohen, Alma and Rajeev Dehejia. "The Effect Of Automobile Insurance and Accident Liability Laws On Traffic Fatalities," Journal of Law and Economics, 2004, v47(2,Oct), 357-393.
Handle: RePEc:nbr:nberwo:9602

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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. 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.
  3. 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.
  4. 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).
  5. 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.
  6. Sun, Stephen Teng & Yannelis, Constantine, 2013. "Quantifying the Premium Externality of the Uninsured," MPRA Paper 54638, University Library of Munich, Germany.
  7. Daniel P. Kessler & Daniel L. Rubinfeld, 2004. "Empirical Study of the Civil Justice System," NBER Working Papers 10825, National Bureau of Economic Research, Inc.
  8. Beth A. Freeborn & Brian McManus, 2007. "Substance Abuse Treatment and Motor Vehicle Fatalities," Working Papers 66, Department of Economics, College of William and Mary.
  9. Yannelis, Constantine & Sun, Stephen Teng, 2013. "The Real Effects of the Uninsured on Premia," MPRA Paper 48264, University Library of Munich, Germany.
  10. 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.
  11. 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.
  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. 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.
  14. 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.
  15. 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.
  16. 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.
  17. 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.

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