EVALUATING AUTOMOBILE INSPECTION POLICY USING AUTO INSURANCE DATA

"This paper examines the effect of mandatory periodic safety inspections on traffic accident rates. Using a data set of more than 15,000 auto insurance policyholders in Japan, we investigate the relationship between car age and accident rates and find little evidence that accident rates decline due to safety inspections, specifically in the inspection year. The result holds, even if we take the heterogeneity across drivers into account, and is robust to various parametric and nonparametric procedures. We conjecture that our results are obtained (a) because most motor vehicle accidents are not caused by mechanical failures and (b) because government regulations impose too strict and frequent inspections on car owners in Japan. "("JEL "C14, K32, L51, L98, R41) Copyright (c) 2008 Western Economic Association International.