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

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Author Info
Alma Cohen
Rajeev Dehejia

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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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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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Handle: RePEc:nbr:nberwo:9602

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Find related papers by JEL classification:
G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Aaron S. Edlin, 1999. "Per-Mile Premiums for Auto Insurance," Law and Economics 9902002, EconWPA. [Downloadable!]
    Other versions:
  2. Steven D. Levitt & Jack Porter, 2001. "How Dangerous Are Drinking Drivers?," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1198-1237, December. [Downloadable!] (restricted)
  3. Aaron S. Edlin & Pinar Karaca-Mandic, 2004. "The Accident Externality from Driving," Public Economics 0401003, EconWPA. [Downloadable!]
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. Cummins, J David & Phillips, Richard D & Weiss, Mary A, 2001. "The Incentive Effects of No-Fault Automobile Insurance," Journal of Law & Economics, University of Chicago Press, vol. 44(2), pages 427-64, October.
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  6. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Ruhm, Christopher J., 1996. "Alcohol policies and highway vehicle fatalities," Journal of Health Economics, Elsevier, vol. 15(4), pages 435-454, August. [Downloadable!] (restricted)
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  8. Gur Huberman & David Mayers & Clifford W. Smith Jr., 1983. "Optimal Insurance Policy Indemnity Schedules," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 415-426, Autumn. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
  10. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March. [Downloadable!] (restricted)
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  11. Landes, Elisabeth M, 1982. "Insurance, Liability, and Accidents: A Theoretical and Empirical Investigation of the Effect of No-Fault Accidents," Journal of Law & Economics, University of Chicago Press, vol. 25(1), pages 49-65, April.
  12. Steven Shavell, 1982. "On Liability and Insurance," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 120-132, Spring. [Downloadable!] (restricted)
  13. J.D. Angrist & Guido W. Imbens & D.B. Rubin, 1993. "Identification of Causal Effects Using Instrumental Variables," NBER Technical Working Papers 0136, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Keeton, William R & Kwerel, Evan, 1984. "Externalities in Automobile Insurance and the Underinsured Driver Problem," Journal of Law & Economics, University of Chicago Press, vol. 27(1), pages 149-79, April.
  15. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 541-62, November. [Downloadable!] (restricted)
  16. Spence, Michael & Zeckhauser, Richard, 1971. "Insurance, Information, and Individual Action," American Economic Review, American Economic Association, vol. 61(2), pages 380-87, May.
  17. Steven D. Levitt & Jack Porter, 1999. "Sample Selection in the Estimation of Air Bag and Seat Belt Effectiveness," NBER Working Papers 7210, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. Peltzman, Sam, 1975. "The Effects of Automobile Safety Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 677-725, August. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. Beth A. Freeborn & Brian McManus, 2007. "Substance Abuse Treatment and Motor Vehicle Fatalities," Working Papers 66, Department of Economics, College of William and Mary. [Downloadable!]
  3. Tom Buchmueller & Michel Grignon & Florence Jusot, 2007. "Unemployment and Mortality in France, 1982-2002," Centre for Health Economics and Policy Analysis Working Paper Series 07-04, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada. [Downloadable!]
  4. Marcelo Côrtes Neri, 2007. "The State of the Youth: Prisons, Drugs and Car Crashes," Economics Working Papers (Ensaios Economicos da EPGE) 661, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  5. 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. [Downloadable!] (restricted)
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