Group 4 | Presentation on June 20, 2012 | 1TERMPROJECT

TERM PROJECT:Determinants of Fatal Car Accidentsin the United States

MBA 555: Managerial EconomicsPresentation on June 20, 2012Group 4: Henning Andrees, Chelsey Hawes, Martin Kumke,

Paula Monteiro, Charly von Wiedersperg

Group 4 | Presentation on June 20, 2012 | 2TERMPROJECT

Agenda

1. Introduction

2. Research History

3. Data and Variables

4. Econometric Model

5. Results

6. Policy Implications

7. Summary and Conclusion

Group 4 | Presentation on June 20, 2012 | 3TERMPROJECT

INTRODUCTIONCar Fatalities Are Devastating to Society

Car crashes are the leading cause of death in ages 5–34 in the US

2.3 million adults treated in the ER as a result of crashes

$41 billion in medical and loss of labor costs

32,788 traffic fatalities in 2010 Causes: aggressive driving,

alcohol, weather, equipment failure 0

0.00005

0.0001

0.00015

0.0002

0.00025

0.0003

0.00035Fraction of U.S. motor vehicle

deaths relative to total population

1 death per 10,000 people per year

Examining the determinants of fatal car accidents in the US

STUDY OBJECTIVE

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RESEARCH HISTORYMany Models Have Been Developed over the Years

Loeb (1987)– Drinking beer, age, speed, vehicle inspection

O’Donnell et al. (1996):– Age, speed, alcohol, vehicle type, seating position

Fridstrom (1999):– Impact of multiple variables on severity of accidents

Ulfarsson et al. (2002):– Impact of gender and type of vehicle on car accident severity

Milton (2006):– Weather, traffic, road conditions, curves

Group 4 | Presentation on June 20, 2012 | 5TERMPROJECT

HYPOTHESESTesting Hypotheses in Four Different Categories

H1 The number of fatal car accidents is explained by …weather and climatic conditions.

H2 The number of fatal car accidents is explained by … the degree of drug and alcohol use.

H3 The number of fatal car accidents is explained by … demographic factors.

H4 The number of fatal car accidents is explained by … driving-related factors.

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DATA AND VARIABLESDiverse Variables Based on Hypothesis Categories

1: Weather and climate Temperature (average) Precipitation (annual) Snowfall (annual) Wind speed (average) Time between sunrise and sunset

3: Demographic factor Average age Sex ratio (male/female) Student population (percent) Number of foreign born (percent) Median income Average family size Population density

2: Drug and alcohol use Beer consumption (per capita) Cigarette use (percentage) Prescription drugs sold (kg per capita)

4: Driving-related factors Number of motor vehicles (per capita) Driving age (full license) Interstate miles (per vehicle) Speed limit (mph) Fine for speeding Suspension for drunk driving Police officers (per capita)

Number of fatal car accidents per 100,000 inhabitants DEPENDENT

INDEPENDENT

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Narrow down the significant variables

METHODOLOGYMultiple Steps to Create the Best Production Model

Basic Assumption:Cobb-Douglas Production Function:

1 2Q L K

Stepwise

Test for regression assumptions Eliminate variables with multicollinearityOLS

No regression parameter for interceptNo Intercept

BEST MODEL:No intercept multiplicative model

DATA: Cross-

sectional 50 states of

the USA Year: 2010 23 variables

SOFTWARE: WinORS

Group 4 | Presentation on June 20, 2012 | 8TERMPROJECT

ECONOMETRIC MODELCobb-Douglas Production Function

Variable Description Parameter Estimate

FA Fatal Car Accidents per 100,000 People DEPENDENTT Average Annual Temperature 1.309

C Percent Cigarette Use in Adults 18+ 0.296

A Average Age 0.699

FB Number of Foreign Born in Percent –0.169

V Number of Motor Vehicles per Person 0.442

D Drive Age (Full License) –1.994

M Interstate Miles per 1,000 Vehicles 0.250

E Law Enforcement Employees per 1,000 People 0.298

0 1.309 0.296 0.699 0.169

0.442 1.994 0.250 0.298

Ln FA Ln Ln T Ln C Ln A Ln FB

Ln V Ln D Ln M Ln E

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RESULTSIs the Model Trustworthy?

F-Value 2,473.843

P-Value 0.00001

R² (adjusted)99.753%

EXPLANATORY POWER

AUTOCORRELATIONDoes not exist in Ln model (No Durbin Watson)

Average VIF 2.302MULTICOLLINEARITY

Group 4 | Presentation on June 20, 2012 | 10TERMPROJECT

Average Annual Temperature 0.00001Cigarette Use in Adults 18+ (%) 0.02066Average Age 0.02066Number of Foreign Born (%) 0.00379Number of Motor Vehicles per Person 0.00500Driving Age (Full License) 0.00011Interstate Miles per Vehicle 0.00011Law Enforcement Employees per Person 0.00001

RESULTSIs the Model Trustworthy?

STATISTICAL SIGNIFICANCE P-Value

Group 4 | Presentation on June 20, 2012 | 11TERMPROJECT

RESULTSIs the Model Trustworthy?

HOMOSKEDASTICITY

White’s Test: 48.221P-Value: 0.30597

Group 4 | Presentation on June 20, 2012 | 12TERMPROJECT

RESULTSIs the Model Trustworthy?

NORMALITY

Correl. For Normality: 0.9935Critical Value: 0.9840

Group 4 | Presentation on June 20, 2012 | 13TERMPROJECT

RESULTSNo Hypothesis Has Been Rejected

H1 The number of fatal car accidents is explained by … weather and climatic conditions.

NOT REJECTED

H2 The number of fatal car accidents is explained by … the degree of drug and alcohol use.

NOT REJECTED

H3 The number of fatal car accidents is explained by … demographic factors.

NOT REJECTED

H4 The number of fatal car accidents is explained by … driving-related factors.

NOT REJECTED

Group 4 | Presentation on June 20, 2012 | 14TERMPROJECT

-1

1

0

-2

CONCLUSIONSElasticities Explain Impact on Fatal Car Accidents

ELASTICITY

Interstate Miles per Vehicle

Average Annual Temperature

Average Age

Number of Foreign Born

# of Motor Vehicles per Person

Cigarette Use in Adults 18+

Driving Age (Full License)

Law Enforcement Employees

Group 4 | Presentation on June 20, 2012 | 15TERMPROJECT

POLICY IMPLICATIONSHow to Survive in the US

MOVE TO A COLD

STATE…

… WHERE YOUNG PEOPLE LIVE

TOGETHER …

… WITH LOTS OF IMMIGRANTS

…

… TOO COOL FOR COPS …ALAS

KA

MAINE

UTAH

CALIFORN

IA

… AND NO ONE

SMOKES!TEXAS

Group 4 | Presentation on June 20, 2012 | 16TERMPROJECT

SUMMARY AND CONCLUSIONSHow to Survive in the US

ALASKA

MAINE

UTAH

CALIFORN

IATEXAS

Whatever you do:

Leave Rhode Island;

wicked dangerous!

And move to:

Group 4 | Presentation on June 20, 2012 | 17TERMPROJECT

Thank you for your attention!Determinants of Fatal Car Accidents in the United States

Group 4 | Presentation on June 20, 2012 | 18TERMPROJECT

References

Injury Prevention and Control: Motor Vehicle Safety. Centers for Disease control and Prevetion. http://www.cdc.gov/motorvehiclesafety/

Traffic safety facts: Crash Stats. US department of Transportation: National Highway Traffic Safety Administratio; 4/11. http://www-nrd.nhtsa.dot.gov/Pubs/811451.pdf

Loeb,P. The Determinants of Automobile Accidents. Journal of Transport Economics and Policy; London School of Economics and Political Science. 21(3);1987:279-287

O’Donnell, C.J.Connor D. Predicting the severity of vehicle accident injuries using models of ordered multiple choice. Accident and Analysis Prevention; 28(6);1996:739-753

Fridstrom,L. Econometric models of road use, accidents, and road investment decisions. Institute of Transport Economics.1999:1-292

Ulfarsson, G; Mannering, F. Differences in male and female injury severity in sport utility vehicle, minivan, pickup, and passenger car accidents. Accident Analysis and Prevention. 36(2);2004:135-147

Milton, J; Shankar, V; Mannering, f. Highway accident severities and the mixed logit model: An explanatory empirical analysis. Accident Analysis and Prevention. 40(1);2008:260-266