Design and Implementation of Driving Time Regulation

Abstract

Our object of study is welfare optimal driving time regulations in professional road transportation. Due to fatigue, traffic accident risks are supposed to increase as driving times rise. Conversely, the quantity and quality of road infrastructure affect productivity and safety in transportation positively. As the typical driver does not bear all the social costs when accidents happen, in the absence of public regulation, she has an incentive to drive too many hours. Hence, we present two types of public regulatory tools: a uniform driving time restriction and a uniform tax. We then compare the likely outcomes of these regulations (second-best policies) with the welfare optimal (first-best) solution. Moreover, as driving time restrictions are commonly applied worldwide, we study the problem of implementing such prescriptions. When public authorities choose optimal resources in driving time restrictions, the detection of the flouting of these restrictions and the penalty levels for non-compliance, the welfare gains involved must balance the direct and indirect enforcement costs. For example, it follows that the welfare-optimal penalty level should not be so high that the most efficient companies are always forced to comply with the uniform driving time restriction.