Antai College of Economics and Management
Shanghai JiaoTong University
Institutional Affiliation: University of Michigan
NBER Working Papers and Publications
|June 2009||Risk-Based Pricing and Risk-Reducing Effort: Does the Private Insurance Market Reduce Environmental Accidents?|
with , : w15100
This paper examines whether risk-based pricing promotes risk-reducing effort. Such mechanisms are common in private insurance markets, but are rarely incorporated in government assurance programs. We analyze accidental underground fuel tank leaks--a source of environmental damage to water supplies--over a fourteen-year period, using disaggregate (facility-level) data and policy variation in financing the cleanup of tank leaks over time. The data suggest that eliminating a state-level government assurance program and switching to private insurance markets to finance cleanups reduced the frequency of costly underground fuel tank leaks by more than 20 percent. This corresponds to more than 3,000 avoided fuel-tank release accidents over eight years in one state alone, a benefit in avoided ...
Published: “Risk-Based Pricing and Risk-Reducing Effort: Does the Private Insurance Market Reduce Environmental Accidents?” (with Haitao Yin and Matthew White), Journal of Law & Economics, Vol. 54, No. 2 (May 2011), pp. 325-363