The Cost of Road Crashes: A Comparison of Methods and Recent Australian Estimates
University of Bath
Faculty of Business and Law
School of Accounting, Finance and Economics/ Finance, Economics, Markets and Accounting Research
Estimations of road crash costs in Australia over recent decades are deficient for two reasons. First, such estimations use an ex post (human capital) approach, despite economic theory recommending the ex ante (willingness to pay) approach as the preferred means of placing dollar values on lives saved. Second, if the human capital approach is used in the absence of ex ante measures, then the derivation of human capital (forgone earnings) measures needs to comprehend factors such as age and gender, educational attainment, labour force experience and sector of employment, which are currently ignored. The paper concludes by highlighting the difference between ex ante and ex post estimates of annual road crash costs in Australia.