The National Safety Council estimates that the expected reduction in occupant death rates due to usage of lap seat belts would be 7-8.5 percent (see Peltzman |1975~). In addition, Campbell and Campbell |1988~ estimate that fatalities in the twenty-five states with seat belt laws were 6.6 percent lower than forecast for these states. This improvement amounts to approximately 1,300 lives saved. Swan |1984~ reports that seat belts are negatively correlated with the number of traffic fatalities. This conclusion is based on a pooled cross-section, time-series model for Australia and New Zealand. Finally, McEwin |1986~ estimates on the basis of his empirical model that a 100 percent usage of seat belts would reduce fatalities by 40 percent.
However, a number of studies have pointed out that, contrary to conventional wisdom, seat belt laws may not reduce the total number of fatalities. Their argument is that use of the safety belt provides the driver with an additional sense of security which translates into relatively more reckless driving. There is a potential for offsetting or compensating behavior on the part of the driver of the automobile. This notion is referred to as the "compensating-behavior hypothesis."
Compensating behavior is justified on both theoretical and empirical grounds. Blomquist |1986~ finds that compensating behavior is utility maximizing if an individual's safety effort and exogenous safety measures (e.g., government regulations) are substitutes in determining the probability of and loss from an automobile accident.
Peltzman |1975; 1976~ tested the impact of automobile safety regulation on both occupant and non-occupant deaths. He found evidence from aggregate time-series and cross-section data that occupants' lives are saved at the expense of pedestrian deaths and a larger number of nonfatal accidents. Recently, Garbacz |1991a~ tested this hypothesis using aggregate time-series data for New Zealand. He found that a mandatory seat belt law, enacted in 1972, was negatively correlated with the deaths of automobile occupants and positively associated with deaths of cyclists and pedestrians. In fact, the Garbacz study indicated complete offsetting in that total deaths showed no relationship to seat belt use (savings in occupant deaths were just offset by the increase in non-occupant deaths). In other work Garbacz |1990; 1991b; 1992~ provides further evidence of offsetting behavior, demonstrating that both non-occupants and rear-seat passengers are more at risk when seat belt laws are in effect. A final example of offsetting behavior was provided in a recent Wall Street Journal article (10 October 1991) that showed that air bags seem to reduce fatalities, but accidents and other associated injuries have increased.
One concern in the Garbacz |1991a~ work was the sensitivity of the results to the "speed variable" (average open-road speed for the 85th percentile of vehicles). He concluded that this variable could be endogenous to the estimation process. Thus, the compensating-behavior hypothesis would imply more risk taking (including speeding) after the imposition of the seat belt law. In fact, Lave and Weber |1970~ first suggested the possibility that mandated safety devices might lead to faster driving, offsetting some or all of the beneficial effect of the safety device.
In this paper we re-examine the issue of compensating behavior when individuals use seat belts. Our investigation has a number of significant departures from previous studies. First, since compensating behavior is a hypothesis of individual action, we test the hypothesis using individual-specific observations. The studies discussed above employed aggregate time-series or cross-section data. At the aggregate level, the statistical regularities could conceivably be caused by other confounding factors.
Second, we test the compensating-behavior hypothesis after accounting for tastes in risks (as manifested by precautionary steps individuals have taken to reduce everyday risks). …