Report Title: Analysis and Estimation of the Social Cost of Motor Vehicle Collisions in Ontario
Author(s): Vodden, K, Smith, D., Eaton, D, and Mayhew, D. (2007) Jurisdiction: Ontario, Canada
Brief Overview
The study was used to determine the social costs of motor vehicle collisions in Ontario. The study used social costs models to produce estimates of human consequences due to motor vehicle collisions.
Costs
The collision costs model estimates (by model) are presented in Tables 6 and 7 below. Table A-4: Core Willingness to Pay Parameters for Human Consequences ($2004)
Model Approach
Two modeling approaches were used namely: the willingness-to-pay (WTP) and discount future earnings (DFE) models. First, willingness-to-pay estimates were divided into three categories: upper bound, lower bound and average.
The upper bound estimates were based on the recent Canadian work on the estimation of value of statistical life by Gunderson and Hyatt (Gunderson and Hyatt, 2001). Gunderson and Hyatt estimated that the benefits to society of reducing the risks that would lead to one fatality are as high as $13 million while the benefits of reducing the risks that would lead to one non-fatal injury are approximately $20,000 (expressed 1988 Canadian dollars). Albeit the number is considered on the high end, the results have not been challenged in the economics literature. Their central point is that earlier estimates of the value of a statistical life may under-estimate the true value of this variable. The potential bias occurs because other models fail to account for risk preferences that may vary with income and do not control for selection factors based on risk preferences. In the case of the selection issue, this means that workers with less risk aversion will accept (self-select into) higher risk jobs and because they are less risk averse will demand a smaller compensating wage differential for exposure to risk. The smaller compensating wage differential then underestimates the required compensation of “average” members of the population for exposure to risk, thereby under-estimating the costs associated with workplace and other risks including motor vehicle risks.
The lower bound estimates are based on the updated values proposed by Vodden (Vodden et al, 1994). The values were estimated using data from Statistics Canada’s 1987 Labour Market Activity Survey and were updated to 2004. The dependent variable in these regression model estimates is the wage rate so that the 1987 value of $4.7 million have been inflated to $7.8 million using Statistics Canada data on wage rates. This adjustment includes an inflation adjustment to retain the real value of the value of statistical life variable and also includes an increasing real wage factor that captures the positive income elasticity of the demand for safety. The lower bound for the activity day variable and the severe injury variable are calculated in the same way.
The mean value of the upper and lower bound estimates provides the central estimating result used in the analysis. Based on these methods the core parameters for the human consequences (death, activity day, partial and total disability) of motor vehicle collisions was provided. Second, the discounted future earnings approach measures losses in productive activity in the workplace and in household activity for those affected by collisions. Losses through 3 main types of human consequences are measured: fatalities, permanent disabilities (total and partial), and temporary disabilities and injuries.
Parameters used in the Model / How Parameters were Calculated
Hospital / Health Care Facilities Cost
A series of studies following a methodology established by the Health Services Restructuring Committee have been conducted of costs in Ontario hospitals. Using 17 such studies average values were computed. Cost associated with a patient day is $216.29 and per emergency room visit $84.33 respectively, both in 2000 dollars. In 2004 dollars these costs are $243 and $95 respectively. These represent costs for use of health care facilities, equipment and supplies and exclude a value for time by health care workers.
Health Care Professional Cost
The following approximate values related to the health care categories in the Chipman (1990) analysis were assigned:
o Primary MD: $100 o Specialist: $150 o Nurse: $40 o Physiotherapist: $75 o Chiropractor: $75 o Other categories: $75
The study estimates the health care professional cost for minor injuries and major injuries as $920 and $4600, respectively.
Police Costs
The Ontario Provincial Police charge-back municipalities for the cost of police services provided. The model used by the police was used in this study to estimate policing costs. The model provides the 2006 base and fully-loaded costs for each level of staff. In addition to base salaries, allocated items in the fully-loaded cost calculated by the model include overtime (based on provincial averages), contractual payouts, benefits, allocated other staff, and direct operating expenses (vehicle use, office and equipment, uniform, and equipment).
The fully loaded costs were applied to the mix of police staff hours to identify a fully loaded average cost per police hour of activity that was expended in relation to motor vehicle collisions. The fully loaded weighted average cost was calculated to be $82.73 ($2006) or $78 in 2004.
Court Activities
Data from the Canadian Centre for Justice Statistics of Statistics Canada provide an estimate of court costs to police costs over a five-year period based on the total expenditures by each. Using this percentage (14.7%) and the fully loaded police costs noted earlier a cost for court proceedings related to motor vehicle collisions was estimated.
Fire Department Costs
The Ontario Fire Marshall’s Office provided 2003 data on operating expenditures ($1.118 billion) and total responses (447,181) by fire departments in Ontario. This resulted in an average total cost per response of $2,501 (2003 $). The figure was converted to 2004 dollars resulting in an average response cost of $2,548.
Ambulance Costs
A cost of $783 (in 2005 $) per transported patient was used for ambulance costs. The value was estimated based on data provided by the City of Toronto website. This average value includes both fixed overheads and variable components of costs. In 2004 dollars the cost per land-based transport by ambulance is $754. A similar value was used for water ambulance service due to lack of data. A value of one-half was assumed for transport by the Coroner. An average cost of approximately $5,000 per person was used if air ambulance service was used.
Additional costs relating to tow trucks, property damages, out-of-pocket expenses, and traffic delays were also developed.
A.8 Calculating External Costs of Transportation in Norway (Eriksen, 2000)