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Offsetting Behavior and the Benefits of Safety Regulations

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  • John C. Hause

Abstract

The net effect of policies to reduce harm to potential victims is sometimes much smaller than the predicted effect because of failure to account for victim offsetting behavior (OB). A simple expected accident loss model is developed where one parameter, the coefficient of diminishing returns, measures quantitatively the marginal offset to the direct policy. The model should be useful in empirical efforts to estimate the OB effect. The article also obtains precise conditions under which OB more than offsets the direct policy effect, shows that stronger risk aversion increases the relative size of OB, and discusses welfare implications of OB. (JEL D18, D61, J28, K32, L51) Copyright 2006, Oxford University Press.

Suggested Citation

  • John C. Hause, 2006. "Offsetting Behavior and the Benefits of Safety Regulations," Economic Inquiry, Western Economic Association International, vol. 44(4), pages 689-698, October.
    • Handle: RePEc:oup:ecinqu:v:44:y:2006:i:4:p:689-698
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    File URL: http://hdl.handle.net/10.1093/ei/cbj041
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    Cited by:

    1. Spash, Clive L., 2009. "The Brave New World of Carbon Trading," MPRA Paper 19114, University Library of Munich, Germany.
    2. Hoy, Michael & Polborn, Mattias K., 2015. "The value of technology improvements in games with externalities: A fresh look at offsetting behavior," Journal of Public Economics, Elsevier, vol. 131(C), pages 12-20.
    3. Calcott, Paul, 2012. "Regulatory triggers and New Source Review," Resource and Energy Economics, Elsevier, vol. 34(3), pages 337-348.
    4. Jianhua Ren & Xiaolian Jiang & Jianrong Yao & Xirong Li & Xinghui Liu & Meiche Pang & Chung Lim Vico Chiang, 2015. "Depression, Social Support, and Coping Styles among Pregnant Women after the Lushan Earthquake in Ya’an, China," PLOS ONE, Public Library of Science, vol. 10(8), pages 1-19, August.

    More about this item

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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