The Effects of Varying Safety Conditions on the External Costs of Driving
In the past two decades, many studies have evaluated the effects of automobile or road safety conditions on driver behavior. The focus of most of these investigations has been the 'offsetting behavior' (or 'risk compensation') hypothesis, which predicts that drivers offset exogenous improvements in safety conditions by driving less safely. Generally, these studies have attempted to measure the degree to which this offsetting response might (or might not) negate the effect of mandated safety improvements in automobiles. Although the empirical evidence is not uniform, most analyses suggest that the net effect of the regulations on overall highway safety is positive, but less than predicted by traffic safety engineers (whose estimates do not allow for the behavioral modifications by drivers). Also, empirical evidence indicates that non-beneficiaries of automobile safety regulations, such as pedestrians, motor cyclists, and bicyclists are at greater risk.
This paper extends the discussion of compensating behavior by evaluating the effects of such behavior on accident costs. In particular, I evaluate how exogenous changes in the safety level of the driving environment (road conditions, weather, etc.) affect the relative losses suffered by the party at fault and other involved parties. In so doing, the analysis augments previous studies by evaluating the influence of offsetting driver behavior on the distribution of accident costs among victims. The estimates presented here lend support to the hypothesis that improvements in the safety level of driving conditions reduce internal more than external accident costs.
Traynor, T. L.
(1994). The Effects of Varying Safety Conditions on the External Costs of Driving. Eastern Economic Journal, 20 (1), 45-60.