Are traffic deaths a major economic problem? The World Health Organization and World Bank think so. They just published a report detailing the human and economic effects of traffic accidents around the world.
About 1.2 million people die each year in such accidents and another 50 million are injured. Economic losses run from 1 percent to 2 percent of gross domestic product. The United States leads the world in absolute numbers of deaths, though we are down the list in rates per 100,000 population and even lower in deaths per 100 million miles driven.
Comparative reports raise interesting questions for economists. Are there economic reasons for disparities in accident rates? Should countries with high traffic death rates expend resources to lower them and on what should they spend money? One might even ask if unsafe roads give poor countries an unfair advantage in international trade.
Some disparities are huge. In El Salvador, 42 people per 100,000 die in road accidents annually versus 3.3 in the Netherlands. This difference is a factor of 13 even though the Dutch have more cars and drive many more miles per capita than Salvadorans.
The United States falls in between these extremes at 15 per 100,000, despite the fact that data from other sources show U.S. deaths per mile driven is low.
Reasons for some of the differences are obvious. Where few people have cars, death rates are low. Egypt’s death rate per 100,000 is lower than Sweden’s. Only a small fraction of Egyptian households owns autos. In addition, Egypt has relatively few roads and streets where traffic moves fast enough for crashes to be fatal.
Argentina loses less than half as many people per 100,000 as the United States because, while auto ownership there has grown, the proportion of Argentine households with automobiles remains substantially below the United States.
Population density matters. Small countries with populations concentrated in high-density urban areas tend to have fewer accidents per person than large, sparsely populated areas. The Netherlands, Sweden and Malta have very low rates of death and injury relative to population because the average auto trip is shorter than in Australia, Canada or the United States, and average speeds tend to be slower.
Public transportation also is important. In western European countries, where most urban areas are well-served with buses and trains and where inter-city public transportation is good, fewer people die or are injured because auto travel is a smaller proportion of all travel.
And, of course, there are cultural differences in how people drive. The per capita rate of death in Italy is twice that of Germany and nearly four times as high that of the Netherlands. The Dutch live closer together and German roads may be superior to those in Italy, but much of the disparity is simply because Italian drivers take bigger risks than their European Union partners.
Alcohol consumption is an important cultural factor. Estonia, Lithuania and Latvia all have death rates four times as high as Sweden even though they have fewer cars and drive fewer miles. As in many former Soviet states, per capita alcohol consumption is high. Danes have more accidents than their neighbors across the straits and some analysts tie this to greater Danish drinking.
Quality of roads also plays a factor, though this is hard to tease out of per capita statistics. In the United States, deaths per 100,000 are 50 percent higher than in Argentina, but deaths per million miles driven are seven times higher in Argentina than in our nation. Safer U.S. roads are one of several factors.
Should nations with high traffic death rates spend money to lower them? Economists would argue the answer depends on opportunity cost. If you can save one life by spending any sum of money, say $100,000, on safer roads or better law enforcement and there is no cheaper way to save lives, then devoting resources to reducing traffic deaths may make society better off.
If, however, it costs $100,000 to save a life by reducing traffic accidents and you can also save a life for $2,000 by spending on public health or sanitation, then allocating money and effort to reducing accidents will make you worse off.
That is probably the case in the developing countries of Africa and Asia, where fatalities per million miles driven are highest. Death tolls on roads of poor countries may be appalling, but in most cases there are even more crying needs.
That raises the trade question.
Reducing traffic deaths in poor countries is rightfully a low priority compared to more cost-effective ways of extending life. You could make the same argument about abating many types of pollution in poor countries.
If U.S. standards were used by Brazil, India or China to reduce air or water pollution, the lives of many people would be improved. But the money spent on that could improve many more lives if allocated to higher-return investments such as basic public health.
U.S. protectionists argue that for trade to be fair, developing countries should be held to the same environmental and labor standards that prevail here or in Europe. Will they also insist that such countries spend large amounts of money reducing traffic deaths for the competitive floor to be level?
© 2004 Edward Lotterman
Chanarambie Consulting, Inc.