Environmental Responsibility: Impact of Waste-Sorting Regulation on Secondary Markets
30 Pages Posted: 3 Jul 2021 Last revised: 13 Dec 2022
Date Written: June 21, 2021
Environmental issues have recently heightened the public's recognition of environmental regulations that potentially benefit humanity by preventing illness and saving lives. However, how environmental regulations affect the secondary market still remains unclear. In this paper, we explore the effect of environmental regulations on secondary markets, which is an important question in the fields of sustainable operations. We study a natural experiment: the implementation of Shanghai's compulsory waste-sorting regulation, which went into effect on July 1, 2019. In particular, we explore how the waste-sorting policy affects consumer postings and purchases in the secondary market. We procure data of 362,568,944 used product listings from April 1, 2019, to November 30, 2019, from a leading online secondary platform. Adopting the difference-in-differences identification with the synthetic control method, we investigate the change in two key market outcome variables--number of listings and purchase volume--before and after the policy is imposed. We find that the implementation of a waste-sorting regulation resulted in an 8.42% decrease in the number of resale listings posted by the young generations in secondary markets. We also show that this regulation only significantly affects the posting of easily discarded goods and the inactive users on the platform. We further conduct a variety of falsification tests and robustness checks to support our main findings. Overall, this study encourages public policymakers to sign more environmental regulations to improve environmental and social welfare. For a win-win situation, policymakers should also have close cooperation on waste management with private companies.
Keywords: waste-sorting policy, environmental responsibility, sustainability, secondary market
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