IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v247y2025ics0165176525000370.html
   My bibliography  Save this article

The vehicle value externality

Author

Listed:
  • Sieg, Gernot
  • Wigger, Berthold U.

Abstract

This paper introduces the vehicle value externality as a previously unacknowledged cost of car traffic. Unlike established externalities such as emissions or congestion, the vehicle value externality arises from the impact of vehicle value on accident damages. By developing a model linking insurance premiums to this externality and applying it to German car traffic data, we estimate the annual aggregate cost at 10 billion euros in 2021.

Suggested Citation

  • Sieg, Gernot & Wigger, Berthold U., 2025. "The vehicle value externality," Economics Letters, Elsevier, vol. 247(C).
  • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176525000370
    DOI: 10.1016/j.econlet.2025.112200
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176525000370
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.econlet.2025.112200?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael L. Anderson & Maximilian Auffhammer, 2014. "Pounds That Kill: The External Costs of Vehicle Weight," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(2), pages 535-571.
    2. Edlin, Aaron S. & Karaca-Mandic, Pinar, 2005. "The Accident Externality from Driving," Department of Economics, Working Paper Series qt2h23t6rt, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    3. Edlin, Aaron S. & Karaca-Mandic, Pinar, 2005. "The Accident Externality from Driving," Department of Economics, Working Paper Series qt0hw1m6q2, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    4. Ian W. H. Parry & Margaret Walls & Winston Harrington, 2007. "Automobile Externalities and Policies," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 373-399, June.
    5. Santos, Georgina & Behrendt, Hannah & Maconi, Laura & Shirvani, Tara & Teytelboym, Alexander, 2010. "Part I: Externalities and economic policies in road transport," Research in Transportation Economics, Elsevier, vol. 28(1), pages 2-45.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    2. Sjur Didrik Flåm & Elmar G. Wolfstetter, 2015. "Liability Insurance and Choice of Cars: A Large Game Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(6), pages 943-963, December.
    3. Mathias Reynaert, 2021. "Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 454-488.
    4. Geir H. M. Bjertnæs, 2019. "Efficient taxation of fuel and road use," Discussion Papers 905, Statistics Norway, Research Department.
    5. Bjertnæs, Geir H.M., 2025. "Economical driving and taxation of road use," Energy Economics, Elsevier, vol. 142(C).
    6. James M. Sallee, 2019. "Pigou Creates Losers: On the Implausibility of Achieving Pareto Improvements from Efficiency-Enhancing Policies," NBER Working Papers 25831, National Bureau of Economic Research, Inc.
    7. Mohammad Haider Kamruzzaman & Takeshi Mizunoya, 2021. "Quantitative analysis of optimum corrective fuel tax for road vehicles in Bangladesh: achieving the greenhouse gas reduction goal," Asia-Pacific Journal of Regional Science, Springer, vol. 5(1), pages 91-124, February.
    8. Lucas W. Davis & James M. Sallee, 2020. "Should Electric Vehicle Drivers Pay a Mileage Tax?," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 1(1), pages 65-94.
    9. Evangelinos, Christos & Tscharaktschiew, Stefan & Marcucci, Edoardo & Gatta, Valerio, 2018. "Pricing workplace parking via cash-out: Effects on modal choice and implications for transport policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 113(C), pages 369-380.
    10. Kim, Jinwon, 2016. "Vehicle fuel-efficiency choices, emission externalities, and urban sprawl," Economics of Transportation, Elsevier, vol. 5(C), pages 24-36.
    11. Geir H. M. Bjertnaes, 2017. "The Efficient Combination of Taxes on Fuel and Vehicles," CESifo Working Paper Series 6789, CESifo.
    12. Bigazzi, Alexander Y. & Figliozzi, Miguel A., 2013. "Marginal costs of freeway traffic congestion with on-road pollution exposure externality," Transportation Research Part A: Policy and Practice, Elsevier, vol. 57(C), pages 12-24.
    13. Cheng Keat Tang & Jos van Ommeren, 2022. "Accident externality of driving: evidence from the London Congestion Charge [Pounds that kill: the external costs of vehicle weight]," Journal of Economic Geography, Oxford University Press, vol. 22(3), pages 547-580.
    14. Kellogg, Ryan, 2018. "Gasoline price uncertainty and the design of fuel economy standards," Journal of Public Economics, Elsevier, vol. 160(C), pages 14-32.
    15. Tscharaktschiew, Stefan, 2020. "Why are highway speed limits really justified? An equilibrium speed choice analysis," Transportation Research Part B: Methodological, Elsevier, vol. 138(C), pages 317-351.
    16. Lu-Yi Qiu & Ling-Yun He, 2018. "Bike Sharing and the Economy, the Environment, and Health-Related Externalities," Sustainability, MDPI, vol. 10(4), pages 1-10, April.
    17. Romem, Issi & Shurtz, Ity, 2016. "The accident externality of driving: Evidence from observance of the Jewish Sabbath in Israel," Journal of Urban Economics, Elsevier, vol. 96(C), pages 36-54.
    18. Tscharaktschiew, Stefan, 2014. "Shedding light on the appropriateness of the (high) gasoline tax level in Germany," Economics of Transportation, Elsevier, vol. 3(3), pages 189-210.
    19. Nehiba, Cody & Tyndall, Justin, 2023. "Highways and pedestrian deaths in US neighborhoods," Regional Science and Urban Economics, Elsevier, vol. 102(C).
    20. He, He & Kim, Chaeyoung, 2023. "Vehicle and Fuel Taxation for Transport Demand Management : Learnings from the Literature through a Development Lens," Policy Research Working Paper Series 10647, The World Bank.

    More about this item

    Keywords

    Vehicle value; Accident damages; Insurance premiums;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176525000370. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.