Let It Rain

I have a new ANU working paper out, titled ‘Precipitation, Profits, and Pile-Ups’.* It arose from an ongoing debate with my wife. She loves it when it rains. I’m normally a bit grumpy about rain. So when she rejoiced about how good rain was for the garden, I’d counter by saying that it made the roads more dangerous. Sure, the vegies are growing better, but how about all those awful crashes?

But while it’s true that roads are more dangerous when it rains, people aren’t stupid. Most of us compensate for rainfall by driving more slowly. Indeed, it turns out that we overcompensate: slowing down more than necessary on days after it has rained. Higher rainfall raises the road toll on the day it falls, but lowers the road toll in subsequent days. On net, more rain means fewer deaths.

Here’s a regression using daily data:

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And here’s a regression using monthly data:

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Here’s the abstract (click on the title for the full paper).

Precipitation, Profits, and Pile-Ups
Andrew Leigh
In considering the economic impacts of climatic changes, economists frequently use annual national income as a proxy for social welfare. I show that such studies suffer from a significant bias, arising from the fact that such models typically ignore changes in mortality rates. Using panel data from Australia, I show that rainfall lowers traffic deaths, suggesting that the standard approach may underestimate the true economic cost of droughts.

As Peter Martin points out, the result is counterintuitive. But putting together the daily and monthly results, it’s now pretty clear to me that I’d better smile and agree with my wife. Rain is good, and not just for the garden.

* I’ve put the paper out as a working paper because I couldn’t see myself doing anything with it. So any journal editor who’d like it, feel free to get in touch.

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2 Responses to Let It Rain

  1. “On net, more rain means more deaths.”

    “I show that rainfall lowers traffic deaths”

    Typo?

  2. Andrew Leigh says:

    Thanks Robert – corrected.

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