479. Alma Cohen & Rajeev Dehejia, The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities, 06/2004; subsequently published in Journal of Law and Economics, Vol. XLVII, October 2004, 357-393.
Abstract: This paper investigates the incentive effects of automobile
insurance, compulsory insurance laws, and no-fault liability laws on
driver behavior and traffic fatalities. We analyze a panel of 50 U.S.
states and the District of Columbia from 1970-1998, a period in which
many states adopted compulsory insurance regulations and/or no-fault
laws. Using an instrumental variables approach, we find evidence that automobile insurance has moral hazard costs, leading to an increase in traffic fatalities. We also find that reductions in accident liability produced by no-fault liability laws have led to an increase in traffic fatalities (estimated to be on the order of 6%). Overall, our results indicate that, whatever other benefits they might produce, increases in the incidence of automobile insurance and moves to no-fault liability systems have significant negative effects on traffic fatalities.