Accident externality of driving: evidence from the London congestion charge

This paper estimates the marginal accident externality of driving in Central London by exploiting variation in traffic flow induced by the London Congestion Charge Zone using an instrumental variable approach. The charge attributed to a 9.4% reduction in traffic flow, which resulted in a less than proportional 6.0% and 7.6% decrease in accidents and slight injuries, and a 6.5% increase in serious injuries/fatalities. Our preferred estimates indicate that the accident, slight injuries and serious injuries/fatalities rate elasticities with respect to traffic flow are -0.36, -0.19 and -1.65, respectively. These estimates imply that the marginal external benefit of road safety from an additional kilometer driven is approximately £0.16. The marginal accident externality is positive, as the marginal driver along congested roads decreases the risk and severity of traffic collisions for other road users by slowing others down and increasing awareness.