TY - JOUR
T1 - The accident externality from driving
AU - Edlin, Aaron S.
AU - Karaca-Mandic, Pinar
PY - 2006/10
Y1 - 2006/10
N2 - 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 $1,725-$3,239 per year, depending on the model. High-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.
AB - 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 $1,725-$3,239 per year, depending on the model. High-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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U2 - 10.1086/508030
DO - 10.1086/508030
M3 - Article
AN - SCOPUS:33750939211
SN - 0022-3808
VL - 114
SP - 931
EP - 955
JO - Journal of Political Economy
JF - Journal of Political Economy
IS - 5
ER -