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Positive externalities from active car safety systems

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  • Berlemann, Michael
  • Matthes, Andreas

Abstract

Policymakers around the globe have opted for high levels of regulation of the market for vehicle safety and declared many vehicle safety systems as mandatory for new cars. In this paper we argue that the delivered justifications for these policies are at least questionable. We add a completely new argument to the discussion and show in a simple theoretical model that vehicle safety systems might cause positive externalities. Based on a large dataset of traffic accidents in Germany we show that the these externalities in fact occur. Based on our estimation results we show that for anti-lock-brakes (ABS) and electronic stability programmes (ESP) the average expected externality exceeds the price of these systems. Thus, the obligation to equip any new car with both ABS and ESP is adequate from an allocative point of view although the official justification for the introduction of these regulations are flawed.

Suggested Citation

  • Berlemann, Michael & Matthes, Andreas, 2014. "Positive externalities from active car safety systems," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 313-329.
    • Handle: RePEc:eee:jpolmo:v:36:y:2014:i:2:p:313-329
    DOI: 10.1016/j.jpolmod.2014.01.004
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    References listed on IDEAS

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    Cited by:

    1. Adams, Samuel & Atsu, Francis, 2015. "Assessing the distributional effects of regulation in developing countries," Journal of Policy Modeling, Elsevier, vol. 37(5), pages 713-725.

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    More about this item

    Keywords

    Regulation; Driving safety; Externalities; Transport;
    All these keywords.

    JEL classification:

    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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