Economic analysis has enhanced our understanding of the efficacy of highway safety regulations. Specifically, a consumer-theoretic literature has developed on drivers' responses to regulations, based on ideas first set forth by Lester lave and W. E. Weber (1970) and more fully thought out by Sam Peltzman (1975). Meanwhile, an empirical literature has also developed, testing hypotheses relating to the effects on safety of speed limits, safety-device regulations, and alcohol policies, among other things. yet, despite extensive research, controversies remain as to the effects of regulations on highway safety.

This paper contributes to the literature on economic aspects of highway safety in an four important ways: First, it is based on a county-level data set for the U. S. for 1970 and !980, affording over 2,600 observations each year in a consistent panel, many more observations than previous studies have used. Second, this study uses different and more appropriate estimation procedures than most previous studies, allowing for the count nature of highway fatalities and correcting for omitted-variable bias otherwise possible in cross-section analysis. Third, the model used here controls for more variables in a single model than previous studies. Finally, this study allows for important differences in the estimated coefficients between urban and rural driving environments.