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Assistant Editors: John Anderson and Adrienne Foerster

Welcome to the RFF Policy Commentary, which is meant to provide an easy way to learn about important policy issues related to environmental, natural resource, energy, urban, and public health problems.

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Motorists do not consider the elevated injury risks to other road users when they choose to drive SUVs and other light trucks rather than cars. Consequently, there is excessive use of light trucks from society’s perspective. How serious is this problem and what can be done about it?

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Vehicular Brinksmanship: What Does It Cost?
Shanjun Li
April 30, 2010
 

Vehicular Brinksmanship: What Does It Cost?

The increasing U.S. market share of sport utility vehicles, pickups, and vans—classified as “light trucks”—in recent decades has been likened to an arms race: anxious about safety, more Americans have been purchasing larger and larger vehicles to better protect themselves and their families in collisions. The market share of new light trucks grew from 17 to about 50 percent in 25 years.

In multiple-vehicle collisions, light trucks do provide superior protection to their occupants, but they pose greater dangers to the people in passenger cars. Light trucks, particularly SUVs and pickups, are generally taller and have higher front ends. When they collide with cars, they hit passenger compartments rather than the steel frames beneath, right in line with the passengers’ heads and upper torsos. And because many light trucks are heavier than cars and have stiffer structures, cars absorb more of the crash energy. The design mismatch and subsequent crash incompatibility mean that the individual SUV owner’s incentive for self-protection worsens overall traffic safety.

For illustration, a study by Gayer (2004), using data on fatal two-vehicle crashes from 1991 through 1998, finds that the driver of a light truck is 0.3 to 0.7 times as likely to die in a crash as an opposing car driver but is 1.5 to 1.9 times more likely to kill the opposing driver. The study also shows that light trucks are more likely to crash than cars, nullifying the well-advertised safety advantage of light trucks. Gayer concludes that a world in which everyone drove light trucks would have substantially more fatalities than a world with only cars. Although the magnitude differs, White (2004) and Anderson (2007) provide the same qualitative finding that light trucks protect their passengers better in multiple-vehicle crashes at the expense of others.

In short, from the standpoint of traffic safety as a whole, there may be too many light trucks on the road compared with what would be optimal from society’s perspective. What are the costs of excessive use of light trucks and what might be some appropriate policy responses?

Cost of the Arms Race

My own work suggests that although vehicles are becoming safer in collisions, due to better design and more safety equipment installed, the risk to other people in automobiles still increases substantially from SUV drivers. Overall, a vehicle fleet with a higher proportion of light trucks would be less safe. Taking the estimates of safety measures for passenger cars and light trucks from traffic accident analyses, I estimate a model of vehicle demand using vehicle sales data from 1999 to 2006 in which the safety of the two types of vehicles is explicitly incorporated. The empirical results suggest that over the vehicle life, the added risk (of fatalities and incapacitating injuries) to others when people drive light trucks rather than cars amounts to $2,444.

The driver of a light truck, however, does not compensate either the accident victim or society in general for this additional cost. Twelve U.S. states currently either require auto insurance policyholders, or give them the option, to choose a no-fault insurance scheme, under which a policyholder is to be reimbursed by the policyholders’ own insurance company without proof of fault, and the policyholder is limited in their ability to seek recovery for losses from the other parties involved in the accident. In the states that operate under tort liability system for auto insurance, liability for damage in automobile accidents is generally based on the negligence rule and a driver is not liable for the damage if the care level is above the negligence standard. Even though light trucks pose greater dangers to others than passenger cars do, the standard does not differ according to vehicle type. In short, when purchasing a vehicle, individuals do not take into account the potential accident cost of their choice to others.


Shanjun Li
What would happen if this accident “externality” from light trucks were fully corrected for by a purchase tax on light trucks? A counterfactual analysis shows that in 2006, a $2,444 tax per light truck would have reduced the sales of new light trucks by 12.3 percent while increasing the sales of new cars by 8.8 percent. This finding suggests that the arms race has been an important force behind the growth of the light truck segment and explains, on average, about 14 percent of the market share of light trucks from 1999 to 2006. The simulation results also show that the corrective tax of $2,444 would have resulted in a reduction of 204 equivalent fatalities or 0.5 percent nationwide (an equivalent fatality is defined as one death or 20 incapacitating injuries) in 2006.

The analysis further shows that the arms race has had significant and heterogeneous effects on the profit of automakers, with the now former Big Three receiving the largest benefit. This finding may explain their intensive efforts to prevent more government regulations on light trucks. Largely because of their lobbying, light trucks (originally intended for business usage), have been subject to less-stringent regulations in vehicle fuel economy and body design—even though the majority of light trucks now serve as passenger vehicles. (They were also subject to lower tailpipe emissions standards, though this is no longer the case).

Possible Remedies

Because the interaction between vehicle choice and traffic safety gives rise to an inefficient vehicle fleet composition and generates significant additional accident costs, the arms race calls for more attention from regulatory agencies. The crash incompatibility problem created by the design of light trucks can be solved relatively easily. Many industry experts believe that light trucks, particularly SUVs, could be redesigned to be safer to others without sacrificing vehicle performance. Light trucks, for example, could be required to comply with a federally mandated bumper height zone, as passenger cars do. The introduction of crossover utility vehicles that are based on passenger car platforms may represent a promising alternative solution to the problem.

Besides a special excise tax on light trucks, several other policy suggestions offer potential for curbing the arms race. One involves changes in liability and insurance. Latin and Kasolas (2002) suggest that SUVs are probably the most dangerous products (other than tobacco and alcohol) in widespread use in the United States and argue for stricter liability on SUV producers through the tort system. Another idea is to use a per-mile premium approach, whereby insurance companies quote risk-classified per-mile rates and then charge owners of light trucks more for liability insurance than passenger cars for the same distance traveled.

Even in the absence of such initiatives, we may see a partial reversing of the rising share of light tuck sales. If, as most analysts predict, oil prices rise in the future, the greater attractiveness of more fuel-efficient vehicles may dampen Americans’ appetite for large vehicles.

Shanjun Li is a fellow at Resources for the Future.

Further Readings:

Anderson, M. 2008. Safety for Whom? The effect of light trucks on traffic fatalities. Journal of Health Economics 27: 973–989.

Gayer, T. 2004. The fatality risks of sport-utility vehicles, vans, and pickups. Journal of Risk and Uncertainty 28(2): 103–33. http://escholarship.org/uc/item/87r277n4.

Latin, H., and B. Kasolas 2002. Bad designs, lethal products: The duty to protect other motorists against SUV collision risks. Boston University Law Review 82: 1161–229.

Li, S. 2010. Traffic safety and vehicle choice: Quantifying the effects of the “arms race” on American roads. Discussion paper 09-33. Washington, DC: Resources for the Future. Also published online Feb. 2010 in the Journal of Applied Econometrics.

White, M. J. 2004.  The “arms race” on American roads: The effect of heavy vehicles on traffic safety and the failure of liability rules. Journal of Law and Economics, 47: 333–356.

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