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Comparing Alternative Policies to Reduce Traffic Accidents

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Author Info
Parry, Ian () (Resources for the Future)

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Abstract

This paper derives and implements formulas for the welfare effects of differentiated and uniform mileage taxes, gasoline taxes, and per mile insurance premiums, for reducing the external costs of passenger vehicle accidents. The model distinguishes three driver groups and five vehicle groups, and we obtain estimates of external accident costs per mile for each group from crash data. The (average) external accident cost is estimated at 2.2-6.6 cents per mile. Accidents costs differ substantially across drivers of different ages, but only moderately across different vehicles groups. Annual welfare gains from a mileage tax differentiated across drivers and vehicles according to marginal external costs are $9.4 billion in the benchmark case. The uniform mileage tax and per-mile insurance reform can achieve 76% and 65% of this welfare gain, respectively, while the gasoline tax can achieve only 28% of the welfare gain. Unlike other policies, the gasoline tax induces costly improvements in average fleet fuel economy that have little effect on reducing external costs.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-03-07.

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Date of creation: 31 Dec 2003
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Handle: RePEc:rff:dpaper:dp-03-07

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Related research
Keywords: traffic accidents; external costs; pricing policies; insurance reform;

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Find related papers by JEL classification:
R48 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government Pricing; Regulatory Policies
H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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References listed on IDEAS
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. Newbery, David M G, 1987. "Road User Charges in Britain," CEPR Discussion Papers 174, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Aaron S. Edlin, 1999. "Per-Mile Premiums for Auto Insurance," Law and Economics 9902002, EconWPA. [Downloadable!]
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  3. J. Daniel Khazzoom, 1997. "Impact of Pay-at-the-Pump on Safety Through Enhanced Vehicle Fuel Efficiency," The Energy Journal, International Association for Energy Economics, vol. 18(3), pages 103-133.
  4. Crandall, Robert W & Graham, John D, 1989. "The Effect of Fuel Economy Standards on Automobile Safety," Journal of Law & Economics, University of Chicago Press, vol. 32(1), pages 97-118, April.
  5. Small, Kenneth A. & Gomez-Ibanez, Jose A., 1999. "Urban transportation," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 46, pages 1937-1999 Elsevier. [Downloadable!] (restricted)
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  6. Jones-Lee, M W, 1990. "The Value of Transport Safety," Oxford Review of Economic Policy, Oxford University Press, vol. 6(2), pages 39-60, Summer.
  7. Parry, Ian & Portney, Paul & Harrington, Winston & Gruenspecht, Howard, 2003. "The Economics of Fuel Economy Standards," Discussion Papers dp-03-44, Resources For the Future. [Downloadable!]
  8. 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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  9. Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future. [Downloadable!]
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  10. 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)
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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. Schrage, Andrea, 2006. "Traffic congestion and accidents," Regensburger Diskussionsbeiträge zur Wirtschaftswissenschaft 419, University of Regensburg, Department of Economics. [Downloadable!]
  2. Eskeland, Gunnar S. & Mideksa, Torben K., 2008. "Transportation fuel use, technology and standards: The role of credibility and expectations," Policy Research Working Paper Series 4695, The World Bank. [Downloadable!]
  3. Parry, Ian & Portney, Paul & Harrington, Winston & Gruenspecht, Howard, 2003. "The Economics of Fuel Economy Standards," Discussion Papers dp-03-44, Resources For the Future. [Downloadable!]
  4. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September. [Downloadable!]
    Other versions:
  5. Gunnar Lindberg & Lars Hultkrantz & Jan-Eric Nilsson & Fridtjof Thomas, 2005. "Pay-as-you-speed: Two Field Experiments on Controlling Adverse Selection and Moral Hazard in Traffic Insurance," Framed Field Experiments 0037, The Field Experiments Website. [Downloadable!]
  6. Parry, Ian & Fischer, Carolyn & Harrington, Winston, 2004. "Should Corporate Average Fuel Economy (CAFE) Standards Be Tightened?," Discussion Papers dp-04-53, Resources For the Future. [Downloadable!]
  7. Parry, Ian, 2005. "Is Pay-As-You-Drive Insurance a Better Way to Reduce Gasoline than Gasoline Taxes?," Discussion Papers dp-05-15, Resources For the Future. [Downloadable!]
    Other versions:
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