What Does Tort Law Deter? Precaution and Activity Levels in No-Fault Automobile Insurance

Abstract:     
Most studies on no-fault automobile insurance examine either fatalities per vehicle mile or fatalities per capita. However, it is well established in the analysis of tort law that tort liability can have incentive effects on both precaution level and activity level. In this paper we separate precaution effects from activity level effects to determine both the total effect of no-fault automobile insurance on fatalities per capita and miles per capita and the component effects of no-fault on fatalities per mile, miles per vehicle, and vehicles per capita. We find that no-fault laws have a significant effect on fatalities per mile and fatalities per capita, but (mostly) insignificant effects on miles per vehicle, vehicles per capita, and miles per capita. We conclude that the deterrence effect of tort law is stronger on precaution than it is on activity level.

Keywords: No-fault automobile insurance, tort, deterrence

JEL Classifications: K13

Working Paper Series