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Comparing Alternative Policies to Reduce Traffic Accidents

  • Parry, Ian

    ()

    (Resources for the Future)

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
Contact details of provider: Web page: http://www.rff.org

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  1. Dahl, Carol & Sterner, Thomas, 1991. "Analysing gasoline demand elasticities: a survey," Energy Economics, Elsevier, vol. 13(3), pages 203-210, July.
  2. Newbery, David M G, 1987. "Road User Charges in Britain," CEPR Discussion Papers 174, C.E.P.R. Discussion Papers.
  3. Aaron S. Edlin, 1999. "Per-Mile Premiums for Auto Insurance," NBER Working Papers 6934, National Bureau of Economic Research, Inc.
  4. 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.
  5. Crandall, Robert W & Graham, John D, 1989. "The Effect of Fuel Economy Standards on Automobile Safety," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 97-118, April.
  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. Steven D. Levitt & Jack Porter, 2001. "Sample Selection In The Estimation Of Air Bag And Seat Belt Effectiveness," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 603-615, November.
  8. Peltzman, Sam, 1975. "The Effects of Automobile Safety Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 677-725, August.
  9. Mannering, Fred & Winston, Clifford, 1995. "Automobile Air Bags in the 1990s: Market Failure or Market Efficiency?," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 265-79, October.
  10. 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. 0(Number 3), pages 103-133.
  11. Edlin, Aaron S., 1999. "Per-Mile Premiums for Auto Insurance," Department of Economics, Working Paper Series qt06g53189, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  12. 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.
  13. Parry, Ian & Portney, Paul & Harrington, Winston & Gruenspecht, Howard, 2003. "The Economics of Fuel Economy Standards," Discussion Papers dp-03-44, Resources For the Future.
  14. Janusz R. Mrozek & Laura O. Taylor, 2002. "What determines the value of life? a meta-analysis," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(2), pages 253-270.
  15. 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.
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