An Exploration of the Offset Hypothesis Using Disaggregate Data: The Case of Airbags and Antilock Brakes

Executive Summary

The offset hypothesis predicts consumers adapt to innovations that improve safety by becoming less vigilant about safety. Previous tests have used aggregate data that may confound the effect of a safety policy with those consumers who are most affected by it. We test the hypothesis using disaggregate data to analyze the effects of airbags and antilock brakes on automobile safety. We find that safety-conscious drivers are more likely than other drivers to acquire airbags and antilock brakes but these safety devices do not have a significant effect on collisions or injuries, suggesting drivers trade off enhanced safety for speedier trips.

JEL Classification L5 · R4

The offset hypothesis predicts that consumers will adapt to innovations that improve safety by becoming less vigilant about safety. They will, for example, drive faster in cars that are equipped with extra protection features, ride on dangerous off-road trails when wearing a bicycle helmet, leave hard-to-open (childproof) bottle caps off medicine containers, pay less attention to infants in bath seats that are intended to prevent drowning, and even take fewer precautions to prevent children from having access to cigarette lighters that have a safety device (Viscusi and Carvallo, 1994). The hypothesis was first offered by Lave and Weber (1970) and rigorously applied by Peltzman (1975) to analyze the effects of the 1960s automobile safety regulations. Since then, engineers, scientists, safety advocates, and policymakers have had to come to terms with the offset hypothesis when evaluating the effectiveness of a safety-enhancing technology. Some have acknowledged its importance while others have dismissed it. Economists have been primarily responsible for testing its validity.

Most empirical tests have been a byproduct of assessments of automobile safety policies such as regulations requiring occupant safety devices, speed limits, and mandatory safetybelt laws. The majority of these tests have found evidence of offsetting behavior. But they have been conducted using aggregate data at either the national (Peltzman, 1975; Crandall et al., 1986; Chirinko and Harper, Jr., 1993; Yun, 2002), state (Calkins and Zlatoper, 2001; Cohen and Einav, 2003), county (Keeler, 1994), or city (Dee, 1998; McCarthy, 1999) level. A few researchers have used less aggregated data derived from state police accident reports (Traynor, 1993; Peterson, Hoffer, and Millner, 1995; Harless and Hoffer, 2003).