Cost-benefit analysis for road safety investments in Belgium: case-study of a seat belt reminder system

Abstract

Belgian and regional government attaches increasing importane to the matter of road safety. Economic analyses improve the allocation of scarce resources to improve road safety. Two types of eonomic analysis, cost-benefit analysis and cost-effectiveness are disussed. A comparison of costs and benefits at different moments in time discussed, with a focus on the discount rate which should be applied in cost-benefit analysis. The difficulties of valuing the victims of road crashes are discussed. It is stressed that international results can't be copied literally for belgian research. A case study is executed in which a cost-benefit analysis for a seat belt reminder system is performed. A 10 year period is taken into account. The unit costs for the seat belt reminder system are taken from australian research. Three types of seat belt reminder systems are considered, each with a different level of extortion. Implementation costs of € 63,00, € 127,00 and € 150,00 are applied. Because it is assumed that the number of accidents doesn't change, no incremental external costs (for congestion, environmental damage of infrastrucutre) occur. Costs and benefits for different levels of effectiveness are calculated. It is assumed that the total number of accidents doesn't change, but the ratio between persons who do buckle up and persons who don't buckle up does change due to the seat belt reminder system. A value of 5,703 million euro for a fatality s assumed. Seriously and slightly injured are valued at 0,771 million euro and 0,183 million euro respectively.The net present value of the costs, for a period of 10 years is shown in the table below. NPV Unit costs Discount rate 4% 5% 7% 15% 63 Euro 285 274 254 195 127 Euro 574 552 512 393 150 Euro 678 652 604 464 The net present value of the benefits for the same period, at different rates of effectiveness and different discount rates is shown below. Discount rate Effectiveness 4% 5% 7% 15% 5% 312 295 266 180 10% 624 591 531 361 15% 936 886 796 542 20% 1.248 1.181 1.062 723 25% 1.560 1.477 1.328 903 30% 1.872 1.772 1.593 1.084 35% 2.184 2.067 1.859 1.265 40% 2.496 2.363 2.124 1.446 45% 2.808 2.658 2.390 1.626 50% 3.120 2.954 2.656 1.807 55% 3.432 3.249 2.921 1.988 60% 3.744 3.544 3.187 2.169 65% 4.056 3.840 3.452 2.349 If one considers the commonly used dicount rates, one can observe the following at each of the different rates: - if the least epensive seat belt reminder system would be chosen, the project would already be beneficial when an effectiveness of 5% would be reached. - if the seat belt reminder system costing € 127,00 would be chosen, an effectiveness of 10% would already make the system beneficial. - the most expensive system would only become beneficial for society when an effectivness between 10% and 15% would be reached. If one would apply the discount rate of 15%, the effectiveness should be higher compared to the situation of the commonly used discount rates. This is necessary for each of the three seat belt reminder systems: - our research shows that to make the system beneficial, 6% of the drivers and passengers who are not wearing a seat belt should install the seat belt reminder syste that costs € 63,00. The net present value of the benefits in this case would add up to 216 million euro over a period of 10 years. - An increase in seat belt wearing amongst non-seat belt wearing drivers and passengers of 12% is necessary to make the seat belt reminder system beneficial from society's point of view. In this case benefits would amount to 433 million euro, which would cover the 393 million euro of costs. - An increase in seat belt wearing amongst non-seat belt wearing drivers and passengers of 13% is necessary to make the seat belt reminder system beneficial from society's point of view. In this case benefits would amount to 469 million euro, which is break even compared to the 464 million euro of costs. our view is that the improvements that are necessary in non-seat belt wearing are feasible. Australian research has observed an increase in seat belt wearing of 17%. Even if this percentage would be an overestimation, the system would still be benifical if introduced in Belgium.