The Accident Externality from Driving
Abstract
We estimate auto accident externalities (more specifically insurance externalities) using panel data on state-average insurance premiums and loss costs. Externalities appear to be substantial in traffic dense states: in California, for example, we find that a typical additional driver increases the total of other people's insurance costs by $2231 per year. In such states, an increase in traffic density dramatically increases aggregate insurance premiums and loss costs. In contrast, the accident externality per driver in low traffic states appears quite small. On balance, accident externalities are so large that a correcting Pigouvian tax could raise $45 billion annually in California alone, and over $140 billion nationally. The extent to which this externality results from increases in accident rates, accident severity or both remains unclear. It is also not clear whether the same externality pertains to underinsured accident costs like fatality risk.Download Info
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Paper provided by EconWPA in its series Public Economics with number 0401003.Length: 29 pages
Date of creation: 09 Jan 2004
Date of revision:
Handle: RePEc:wpa:wuwppe:0401003
Note: 29 pages, Acrobat .pdf
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Related research
Keywords:Other versions of this item:
- Aaron S. Edlin & Pinar Karaca-Mandic, 2006. "The Accident Externality from Driving," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 931-955, October.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-01-12 (All new papers)
- NEP-HEA-2004-01-12 (Health Economics)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Francesca Barigozzi & Bertrand Villeneuve, 2006.
"The Signaling Effect of Tax Policy,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 8(4), pages 611-630, October.
- Barigozzi, Francesca & Villeneuve, Bertrand, 2006. "The signaling effect of tax policy," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/5402, Université Paris-Dauphine.
- F. Barigozzi & B. Villeneuve, 2004. "The signaling effect of tax policy," Working Papers 500, Dipartimento Scienze Economiche, Universita' di Bologna.
- Alma Cohen & Rajeev Dehejia, 2003.
"The Effect of Automobile Insurance and Accident Liability Laws in Traffic Fatalities,"
NBER Working Papers
9602, National Bureau of Economic Research, Inc.
- Cohen, Alma & Dehejia, Rajeev, 2004. "The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 357-93, October.
- Lin, C.-Y. Cynthia & Prince, Lea, 2010.
"The Optimal Gas Tax for California,"
Institute of Transportation Studies, Working Paper Series
qt43k7p395, Institute of Transportation Studies, UC Davis.
- Lin, C.-Y. Cynthia & Prince, Lea, 2009. "The optimal gas tax for California," Energy Policy, Elsevier, vol. 37(12), pages 5173-5183, December.
- Thomas Leonard, 2008. "Robert H. Frank, Falling behind: how rising inequality harms the middle class," Constitutional Political Economy, Springer, vol. 19(2), pages 158-164, June.
- 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.
- Ian W. H. Parry, 2005. "Is Pay-as-You-Drive Insurance a Better Way to Reduce Gasoline than Gasoline Taxes?," American Economic Review, American Economic Association, vol. 95(2), pages 288-293, May.
- Schrage, Andrea, 2006. "Traffic Congestion and Accidents," University of Regensburg Working Papers in Business, Economics and Management Information Systems 419, University of Regensburg, Department of Economics.
- Maria Dementyeva & Paul R. Koster & Erik T. Verhoef, 2013. "Regulation of Road Accident Externalities when Insurance Companies have Market Power," Tinbergen Institute Discussion Papers 13-019/VIII, Tinbergen Institute.
- Steimetz, Seiji S.C., 2008. "Defensive driving and the external costs of accidents and travel delays," Transportation Research Part B: Methodological, Elsevier, vol. 42(9), pages 703-724, November.
- Comerford, David A., 2011. "Attenuating focalism in affective forecasts of the commuting experience: Implications for economic decisions and policy making," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 691-699.
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