1.2 A sample honors paper  (Page 3/6)

A second phyical characteristic that affects the fatality rate is the type of road used in a state. In particular, it is well-known that in the United States perhaps the safest roads are rural interestate highways. Thus, in our model we will need to hold constant the type of highway in the state. An additional variable that potentially affects the fatality rate is the mix of drivers. In particular, given the propensity of insurance companies to charge higher rates to individuals under the age of 25, it is reasonable to assume that the more young drivers in the state the higher the fatality rate. Similarly, given the tendency of the elderly to have decreased reaction rates, it is possible that the presence of more elderly drivers would drive up the automobile accident rate.

There are several behavioral variables that might affect driving habits and, thus, automobile accident rates. First, it seems reasonable to assume that the value of time and cost of death are higher for wealthier people than they are for less wealth drivers. However, the direction of the effect of income on driver behavior is unclear. A person with a higher value of time might be more willing to speed than one with a lower value of time because time spent driving is time not spent earning income or engaging in leisure. Additionally, and here the issue is very uncertain, a wealthier person may be less willing to engage in risky driving or drinking behavior because he or she has more income to lose than a poorer individual.

A second variable that affects the behavior of individuals is the cost of gasoline. Higher gas prices will cause individuals to drive less and closer to the gas efficient speed. Most often driving closer to the gas efficient speed implies a slower and safer speed. Moreover, since all drivers are driven toward the gas efficient speed, the variance in speeds on the highways should be reduced. In either case, a higher price of gasoline should cause the number of automobile fatalities to fall. Since gasoline is purchased on the world market, the major source of differences in state-level gasoline prices is diffences among the state gasoline taxes. Similarly, we would expect things like state taxes on alcohol consumption and the strictness of the of the DUI laws to reduce both the amount of alcohol comsumption and the amount of driving under the influence.

In the most general terms the model to be estimated is:

where FPVMD is a measure of the number of automobile fatalities per vehicle mile driven annually in a state. In the next section of the paper we will make this model useable by chosing specific variables to proxy the explanatory variables

Exercises

1. The model described is incomplete (as are almost all useful models). What, if anything, would you add to the model?
2. Often the models in economics papers involve constrained optimization models that yield the predictions that are tested in the empirical part of the paper. Are there any optimization models implicit in the description above?