IDEAS home Printed from https://ideas.repec.org/p/cdl/econwp/qt0hw1m6q2.html
   My bibliography  Save this paper

The Accident Externality from Driving

Author

Listed:
  • Edlin, Aaron S.
  • Karaca-Mandic, Pinar

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.

Suggested Citation

  • 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.
  • Handle: RePEc:cdl:econwp:qt0hw1m6q2
    as

    Download full text from publisher

    File URL: http://www.escholarship.org/uc/item/0hw1m6q2.pdf;origin=repeccitec
    Download Restriction: no

    References listed on IDEAS

    as
    1. Aaron S. Edlin, 1999. "Per-Mile Premiums for Auto Insurance," NBER Working Papers 6934, National Bureau of Economic Research, Inc.
    2. Ruhm, Christopher J., 1996. "Alcohol policies and highway vehicle fatalities," Journal of Health Economics, Elsevier, vol. 15(4), pages 435-454, August.
    3. Jerry Green, 1976. "On the Optimal Structure of Liability Laws," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 553-574, Autumn.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    insurance; auto accidents; externalities;

    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:cdl:econwp:qt0hw1m6q2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff). General contact details of provider: http://edirc.repec.org/data/ibbrkus.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.