Household Responses to Pricing Garbage by the Bag

Abstract

This paper estimates household reaction to the implementation of unit-pricing for the collection of residential garbage. We gather original data on weight and volume of weekly garbage and recycling of 75 households in Charlottesville, Virginia, both before and after the start of a program that requires an eighty-cent sticker on each bag of garbage. This data set is the first of its kind. We estimate household demands for the collection of garbage and recyclable material, the effect on density of household garbage, and the amount of illegal dumping by households. We also estimate the probability that a household chooses each method available to reduce its garbage. In response to the implementation of this unit-pricing program, we find that households (I) reduced the weight of their garbage by 14%. (2) reduced the volume of garbage by 37% and (3) increased the weight of their recyclable materials by 16%. We estimate that additional illegal-or at least suspicious-disposal accounts for 0.42 pounds per person per week, or 28% of the reduction in garbage observed at the curb.

Household Cooperation in Waste Management: Initial Conditions and Intervention

“…Since the earliest papers on the economics of household waste (Jenkins, ; Fullerton and Kinnaman, ; Hong and Adams, ), right up to the most recent work (Watkins et al ., ; Bel and Gradus, , Bucciol et al ., ) contributions on the economics of household waste, have mainly focused their attention on the role of price in intervention. The main question asked has been whether paying more per unit for mixed waste disposal (relative to recycled waste), enhances the degree to which households cooperate in waste management schemes.…”

“…This type of tax encourages lower‐cost households to undertake the greatest level of effort, thereby minimizing damage to society both statically and dynamically (Baumol and Oates, ). And, as a double‐dividend, such taxes raise revenue which can be used to reduce the (distorting) burden of the overall tax system, or ear‐marked for waste management (Goulder and Parry, ), albeit the more successful the tax is in raising revenue, the less successful it is in changing behaviour (Fullerton and Kinnaman, ; Fullerton et al ., ). From the perspective of a utility‐maximizing households with income constraints, the higher the marginal price of waste disposal, the less waste they will want to produce, considering that households derive benefits from using this income in ways other than paying for waste (ceteris paribus) .…”

“…Indeed, monetary incentives constitute the canonical economic remedy to any environmental marketfailure to incentivize households through price-based intervention (Hahn, 1989). Similarly, in the literature on the economics of waste, monetary incentives have also occupied centre-stage (Fullerton and Kinnaman, 1996;Kinnaman and Takeuchi, 2014). Theoretically, a "Pigouvian Tax" equal to the externality cost of waste, is capable of reducing waste up to the point where the marginal benefits of internalization equal the marginal costs of abatement (Pigou, 1960).…”

“…The extent of policy intervention in the domain of household waste separation and recycling participation is mirrored by the voluminous economic research on the determinants of household cooperation in such activities. Spanning at least four decades, this literature is rich and nuanced, and includes a well‐developed theoretical backbone that started with models of waste production (Wertz, ), and was later extended to consider recycling and illegal disposal (Fullerton and Kinnaman, ). Building on economic theories of altruism in the field of public goods (Andreoni, ), and upon insights on altruistic, moral and environmental behaviour from the field of social psychology (Schwartz, ; Schwartz, ; Stern, ), recent theoretical work has turned its attention to household motives, and the way in which these may interact with recycling intervention (Brekke et al ., ; Bruvoll and Nyborg, ; Brekke et al ., ).…”

“…. 1976), and was later extended to consider recycling and illegal disposal (Fullerton and Kinnaman, 1996). Building on economic theories of altruism in the field of public goods (Andreoni, 1990), and upon insights on altruistic, moral and environmental behaviour from the field of social psychology (Schwartz, 1970;Schwartz, 1977;Stern, 2000), recent theoretical work has turned its attention to household motives, and the way in which these may interact with recycling intervention (Brekke et al, 2003;Bruvoll and Nyborg, 2004;Brekke et al, 2010).The main muscle of this literature lies, however, in the range of applied studies which seek to ascertain the determinants of household waste generation and cooperation under different intervention regimes and in different contexts.…”