The Accident Externality from Driving
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 the increase in traffic density from a typical additional driver increases total statewide insurance costs of other drivers by $1,725â€“$3,239 per year, depending on the model. Highâ€“traffic density states have large economically and statistically significant externalities in all specifications we check. 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 $66 billion annually in California alone, more than all existing California state taxes during our study period, and over $220 billion per year nationally.
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- Aaron S. Edlin, 1999.
"Per-Mile Premiums for Auto Insurance,"
NBER Working Papers
6934, National Bureau of Economic Research, Inc.
- Aaron S. Edlin, 1999. "Per-Mile Premiums for Auto Insurance," Law and Economics 9902002, EconWPA.
- Aaron S. Edlin., 1999. "Per-Mile Premiums for Auto Insurance," Economics Working Papers 99-262, University of California at Berkeley.
- Aaron S. Edlin, 2003. "Per-Mile Premiums for Auto Insurance," Law and Economics 0303001, EconWPA.
- 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.
- Jerry Green, 1976. "On the Optimal Structure of Liability Laws," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 553-574, Autumn.
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