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OF DRIVING WITHOUT A LICENCE - page 11 / 14

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was about 9.5106 per km in 1997. When this happens it will always be revealed if the drivers drive illegally; consequently a minimum value of expected penalty cost per km of

driving illegally can be estimated to 0.03 Nkr (9.5106 .3000) or 3 % of average Q. One may argue that the costs of being involved in an accident are higher when driving illegally. The Norwegian insurance companies say, however, that there are no clear rules whether driving without a licence reduces the insurance cover when an accident takes place, and, in any case, the reduction would not be very high. In summary, the above suggest that most of the perceived costs of driving without a license are moral costs.4

Estimated elasticity ratio Table 2 shows, firstly, that the value of λ decreases with d. This means that the more elastic one assumes that car drivers’ demand is with respect to car usage costs in the short run, the lower is the ratio between elasticities describing different time horizons. Despite the decrease in this ratio, the absolute value of drivers’ 2 year car usage elasticity increases with the magnitude of sensitivity one assumes for car usage with respect to car usage costs in the short run. The estimated ratios as well as the 2-years elasticities are higher the higher the value of drivers’ perceived car usage costs per km are. The average value of λ in Table 2 is 4.4. This means that the adjustments to driving licence suspension as far as driving is concerned, is four times higher over a 2 years period than during the first 12 months.

The 2 years elasticities estimated in Table 2 are much higher (average value of 1.03) than long-run elasticities from other studies, in spite of the fact that they do not reflect the long run. It is not surprising since they relate to changes in driving with respect to car usage costs and that these elasticities are likely to be higher than those for car usage in general because driving and being a passenger in a private car are near substitutes, especially for those living in households where several members hold a driving licence. Studies of car usage elasticities with respect to car usage costs therefore give limited information about

4 There are many stories in Norway about drivers finally being caught after having driven up to 50 year without a driving license.

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