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STRICT PRODUCT LIABILITY AND SAFETY: EVIDENCE FROM THE GENERAL AVIATION MARKET
Author(s) -
NELSON RANDY A.,
DREWS JAMES N.
Publication year - 2008
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2007.00098.x
Subject(s) - liability , aviation , accident (philosophy) , product (mathematics) , general aviation , economics , business , actuarial science , finance , engineering , philosophy , geometry , mathematics , epistemology , aerospace engineering
This paper examines the impact of a strict product liability standard on the accident rate in the general aviation (GA) industry. Liability expenses increased by 775% between 1976 and 1986, reducing the sales of new GA aircraft by 90% and increasing the age of the GA fleet. Using both aggregate and model‐specific data, our results indicate that the increase in the age of the GA fleet increased the accident rate by 25%–35% during 1981–2000. In addition, the higher price of GA aircraft boosted sales of homebuilt planes, which have higher accident and fatality rates than GA aircraft. ( JEL K13, L62, L15)