Thursday, 26 April 2012

Fuel economy and safety

This is a bad news, good news story. In a new working paper from the NBER (NBER Working Paper No. 18012, issued in April 2012) Mark R. Jacobsen looks at Fuel Economy and Safety: The Influences of Vehicle Class and Driver Behavior.

Jacobsen starts by making the point that fuel economy standards change the composition of the vehicle fleet, potentially influencing accident safety. He then introduces a model of the vehicle fleet that captures risks across interactions between vehicle types while simultaneously recovering estimates of unobserved driving safety behavior. The model importantly includes the ability to consider the selection of driver types across vehicles. He  applies the model to the present structure of U.S. fuel economy standards and find an adverse effect on safety: Each MPG increment to the standard results in an additional 149 fatalities per year in expectation. That is the bad news.

The good news? Next Jacobsen shows how two alternative regulatory provisions can fully offset the negative safety consequences; minor changes in the regulation produce a robust, near-zero change in accident fatalities while conserving the same quantity of gasoline.

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