The Journal of Socio-Economics 37 (2008) 2505–2512 Short communication Impact of formal and informal deterrents on driving behavior Eiji Yamamura Seinan Gakuin University, Department of Economics, 6-2-92 Sawaraku Nishijin, Fukuoka 814-8511, Japan Received 29 December 2006; received in revised form 19 October 2007; accepted 10 December 2007 Abstract This paper explores, using panel data of traffic accidents in Japan, how formal and informal deterrence affect driving manners. I found through fixed effects and fixed effects 2SLS estimations that formal deterrents, such as police, cause drivers to drive attentively but that this effect is not inversely associated with dangerous driving. Informal deterrents, on the other hand, impede dangerous driving but do not induce drivers to drive more attentively. © 2008 Elsevier Inc. All rights reserved. JEL classification: K42; Z13 Keywords: Formal deterrent; Informal deterrent; Driving behavior; Panel data 1. Introduction If a drunk, alcoholic driver drives along a road and kills a child, he knows that his neighbors will look down on him and that his employer will discover that he is an alcoholic. Over time, the entire community may come to ostracize this driver (Posner and Rasmusen, 1999). Such a sanction is considered to be the cost of committing a crime (Funk, 2005). The higher the cost, the stronger the social norm to “not commit a crime” becomes. Therefore, the strength of relative social norms plays a critical role in deterring drivers from driving dangerously. I believe that social norms are the key determinants in the attitudes of drivers. Social norms are thought to be reinforced by social capital and social organization (Putnam, 2000). This is why in this study we pay particular attention to the role of social norms in the regulation of drivers’ manners and include the proxy variables of social capital and social disorganization. Even if a community is tightly knit and social norms are strong, if an accident is not serious, then the cost of committing the crime is likely to be low. Consequently, we postulate the hypothesis that the cost of committing a crime depends upon the extent of the accident. On the other hand, formal deterrence of bad driving behavior also exists in the form of regulations. For instance, numerous empirical analyses have been compiled regarding regulations for automobile safety and effectiveness. The study of the impact of automobile inspections on the reduction of automobile accidents and fatality rates has drawn the attention of many researchers. Peltzman (1975) argued that drivers drive more dangerously to offset some or all E-mail address: cyl02111@nifty.com. 1053-5357/$ – see front matter © 2008 Elsevier Inc. All rights reserved. doi:10.1016/j.socec.2007.12.004