Estimating the Impact of the Pay-As-You-Throw Program on Waste Reduction: Using MTE Analysis

Abstract

This paper investigates the waste reduction effect of the pay-as-you-throw (PAYT) program, which charges households for non-recyclable household waste, while accounting for self-selection into treatment. To address self-selection bias and heterogeneous treatment effects related to municipalities’ willingness to adopt PAYT, we estimate the marginal treatment effect (MTE) using the fiscal condition of municipalities as an instrumental variable, since fiscally constrained municipalities tend to adopt PAYT even though residents’ waste disposal behavior is not directly influenced by fiscal condition.

By estimating the MTE, we find that PAYT promotes recycling and reduces household waste for most municipalities, but the recycle-promoting effect of PAYT is limited for municipalities with less willingness to adopt PAYT. We also find that PAYT does not reduce total waste when business-related waste is considered, because PAYT induces immoral disposal: residents facing PAYT dispose household waste as business-related waste at shops and firms with public trash cans. Moreover, we show that the further marginal expansion of PAYT will not lead to additional waste reduction or the promotion of recycling.