Background According to economic theory, when all other things are equal, enforcing stricter penalties—like larger traffic fines—should deter illegal behavior. Most developing countries, including Ethiopia, use fixed rate and limited range traffic fine/penalty system. Such fines may significantly affect the finances of those with lower salaries, as it takes up a significant portion of their income thereby significantly affecting their livelihoods. In addition to unfairly penalizing individuals with lower earnings, this system is ineffective in discouraging the wealthy. Therefore, policy makers need to look into implementing a means-tested traffic fine system, in which fines are determined by the income of the recipients.

The specific objective of the policy analysis is:-

• To investigate the fixed and income based traffic penalty system in developing countries

• To evaluate merits and demerits and potential deterrence impact of income based traffic penalty system in Ethiopia

Policy Analysis The approach to be followed in the analysis is as follows:

• Collect the income level, GDP and traffic penalty fine rates for different countries including developing and developed countries.

• Build a trend analysis and a fitted curve model to summarize the correlation between traffic fines and income changes.

• Compare the results based on penalty system (fixed vs. income based) and traffic crash situation on the selected countries to understand the deterrence situations.

Policy Implications The analysis and results will be beneficiary for policy makers working on the traffic penalty regulation modifications. These issues are very sensitive as they affect a wide range of the population and their livelihoods, and accordingly, need to be treated carefully and pass through a thorough and inclusive process. Therefore, the outcome of study will support an informed policy formulation and more specifically an effective traffic penalty system.

Conclusions The initial analysis implies that there is a significant correlation between income level and traffic fines and there is a higher deviation from the general trend in developing countries when setting the traffic penalty amounts. Therefore, the need to change the traffic penalty policy has to be carefully investigated to inform and guide policy makers.