Improving payment of traffic fines with financial incentives: Discounts versus penalties

Stellenbosch Working Paper Series No. WP18/2019
 
Publication date: December 2019
 
Author(s):
[protected email address] (Department of Economics, Stellenbosch University)
[protected email address] (Royal Holloway, University of London)
Ada Jansen (Department of Economics)
[protected email address] (Department of Economics, Stellenbosch University)
 
Abstract:

The effective enforcement of traffic laws is critical for improved road safety outcomes. Decisions to follow traffic rules and pay fines are influenced by formal institutions (e.g. laws, court summons, and fines) as well as informal institutions (e.g. norms and aspects of culture). Formal and informal institutions create incentives that should be designed to steer individuals’ behaviour towards desired outcomes. Unfortunately, there is no reason to believe that the institutions to deal with traffic violations in South Africa currently create effective incentives. This paper discusses the findings of a controlled laboratory experiment that tested the efficacy of different financial incentives which may influence the payment of traffic fines. An early payment discount similar to the incentive under AARTO was compared to a late payment penalty (used in other countries, for example, some states in the USA), and to the absence of any incentives. Furthermore, we examined whether the willingness to settle fines is sensitive to the likelihood of detection by the authorities. We found that introducing financial incentives significantly increases voluntary payment of fines, irrespective of whether immediate payment is encouraged with a discount or late payment is discouraged with a surcharge. In addition, subjects are more sensitive to the likelihood of detection when financial incentives are present.

 
JEL Classification:

B52, C91, D02, D04, K42, L91, L98

Keywords:

Traffic laws, law enforcement, South Africa, laboratory experiments, human behaviour

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26 October 2020
Last week was quiet on the domestic data front. Even so, risky assets outperformed. This included the rand exchange rate, which ignored idiosyncratic weakness in peer currency the Turkish lira. The rand was also immune to a further worsening of the COVID-19 situation in Europe. Renewed concern about the Eurozone (EZ) GDP outlook was reflected in a pullback...

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