Traffic fatalities: does income inequity create an externality?

Responsible for 20 million severe injuries and/or deaths annually, few epidemics receive less attention than traffic accidents. Going beyond confirming an inverted U-shaped relationship between mean income and fatalities, we show theoretically that income inequality can positively affect fatalities in two ways. Each operates through heterogeneity between road users, and while the direct effect can be expected to evaporate with rising income, the indirect effect may prove to be an externality in that the relationship remains regardless of the level of income. Our model is supported by evidence from 79 countries between 1970 and 2000.

Traffic fatalities and public sector corruption

Traffic accidents result in 1 million deaths annually worldwide, though the burden is disproportionately felt in poorer countries. Typically, fatality rates from disease and accidents fall as countries develop. Traffic deaths, however, regularly increase with income, at least up to a threshold level, before declining. While we confirm this by analyzing 1,356 country-year observations between 1982 and 2000, our purpose is to consider the role played by public sector corruption in determining traffic fatalities. We find that such corruption, independent of income, plays a significant role in the epidemics of traffic fatalities that are common in relatively poor countries.