How Effective Are Non‐Monetary Instruments for Safe Driving? Panel Data Evidence on the Effect of the Demerit Point System in Denmark

Abstract

Using unusually rich longitudinal data on traffic offenses, this paper exploits a reform that introduced a point‐recording scheme in Denmark to estimate the behavioral responses of drivers to a non‐monetary penalty based on demerit points. We find that drivers exhibited substantial behavioral responses to each demerit point assigned to their driving licenses. We also find that drivers’ efforts, and hence responses, increased with the number of demerit points they accumulated. Depending on the number of demerit points accumulated, drivers with one or more demerit points reduced their frequency of traffic offenses by 9–34 percent.