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The Effects of Automobile Recalls on the Severity of Accidents

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  • Hugo Benitez-Silva

    ()
    (Department of Economics, Stony Brook University)

  • Yong-Kyun Bae

    ()
    (Department of Economics and Management, Hood College.)

Abstract

The number of automobile recalls in the U.S. has substantially increased over the last two decades, and after a record of over 30 million cars recalled in 2004, in the last few years it has consistently reached between 15 and 17 million, and in 2009 alone 16.4 million cars were recalled. Toyota's recall crisis in 2010 illustrates how recalls can affect a large number of American drivers and the defects connected to them can result in loss of life and serious accidents. However, in spite of the increase in public concern over recalls and the loss of property and life attached to them, there is no empirical evidence of the effect of vehicle recalls on safety. This paper investigates whether vehicle recalls reduce accidental harm measured by the severity of injuries in vehicle accidents. The results of our analysis show that if a recall for a new-year model is issued, then the severity of injuries of accidents continuously diminishes during the rst year after the recall, something we do not nd among cars not subject to recalls. This is because defects are repaired over time but also because drivers react by driving more carefully until the defects are fixed. To minimize the losses attached to having dangerously defective cars on our roads, both quick and timely recall issuance are needed and more detailed information on defects should be delivered to owners of defective vehicles. The latter can be made possible through simple but important policy changes by the U.S. government regarding recall information sharing with drivers and insurance companies.

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File URL: http://ms.cc.sunysb.edu/~hbenitezsilv/RecallsandSeverity2010.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Stony Brook University, Department of Economics in its series Department of Economics Working Papers with number 10-03.

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Date of creation: Oct 2010
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Handle: RePEc:nys:sunysb:10-03

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Web page: http://www.stonybrook.edu/economics
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Keywords: Automobile Recalls; Safety Regulation; Vehicle Defects; Car Accidents.;

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References

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  1. Yong‐Kyun Bae & Hugo Benítez‐Silva, 2011. "Do vehicle recalls reduce the number of accidents? The case of the U.S. car market," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 30(4), pages 821-862, 09.
  2. William W. Gould & Jeffrey Pitblado & Brian Poi, 2010. "Maximum Likelihood Estimation with Stata," Stata Press books, StataCorp LP, edition 4, number ml4, March.
  3. Louis Kaplow & Steven Shavell, 1999. "Economic Analysis of Law," NBER Working Papers 6960, National Bureau of Economic Research, Inc.
  4. Crafton, Steven M & Hoffer, George E & Reilly, Robert J, 1981. "Testing the Impact of Recalls on the Demand for Automobiles," Economic Inquiry, Western Economic Association International, vol. 19(4), pages 694-703, October.
  5. Rupp, Nicholas G & Taylor, Curtis R, 2002. "Who Initiates Recalls and Who Cares? Evidence from the Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 123-49, June.
  6. Orley Ashenfelter & Michael Greenstone, 2002. "Using Mandated Speed Limits to Measure the Value of a Statistical Life," NBER Working Papers 9094, National Bureau of Economic Research, Inc.
  7. Marino, Anthony M, 1997. "A Model of Product Recalls with Asymmetric Information," Journal of Regulatory Economics, Springer, vol. 12(3), pages 245-65, November.
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Cited by:
  1. Bae, Yong-Kyun & Benitez-Silva, Hugo, 2013. "Information Transmission and Vehicle Recalls: The Role and Regulation of Recall Notification Letters," MPRA Paper 50380, University Library of Munich, Germany.
  2. Hugo Benitez-Silva & Yong-Kyun Bae, 2013. "Information Transmission and Vehicle Recalls: The Role and Regulation of Recall Notification Letter," Department of Economics Working Papers 13-02, Stony Brook University, Department of Economics.
  3. Bae, Yong-Kyun, 2013. "Primary Seat-Belt Laws and Driver Behavior: Evidence from Accident Data," MPRA Paper 49823, University Library of Munich, Germany, revised 15 Sep 2013.

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