Garbage, Recycling, and Illicit Burning or Dumping

15 Pages Posted: 19 Jul 2004 Last revised: 28 Dec 2011

See all articles by Don Fullerton

Don Fullerton

University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Thomas C. Kinnaman

Bucknell University - Department of Economics

Date Written: May 1993

Abstract

Additional solid waste disposal imposes resource and environmental costs, but most residents still pay no additional fee per marginal unit of garbage collection. In a simple model with garbage and recycling as the only two disposal options, we show that the optimizing fee for garbage collection equals the resource cost plus environmental cost. When illicit burning or dumping is a third disposal option, however, the optimizing fee for garbage collection can change sign. Burning or dumping is not a market activity and cannot be taxed directly, but it can be discouraged indirectly by a system with a tax on all output plus a rebate on proper disposal either through recycling or garbage collection. This optimizing fee structure is essentially a deposit-refund system. The output tax helps achieve the first-best allocation even though it may affect the choice between consumption and untaxed leisure, because consumption leads to disposal problems while leisure does not.

Suggested Citation

Fullerton, Don and Kinnaman, Thomas C., Garbage, Recycling, and Illicit Burning or Dumping (May 1993). NBER Working Paper No. w4374. Available at SSRN: https://ssrn.com/abstract=300163

Don Fullerton (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
(217) 244-3621 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Thomas C. Kinnaman

Bucknell University - Department of Economics ( email )

Lewisburg, PA 17837
United States
570-524-3465 (Phone)

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