Policies for Green Design

24 Pages Posted: 13 Sep 1999 Last revised: 7 Jun 2014

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)

Wenbo Wu

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Date Written: May 1996

Abstract

We analyze alternative policies such as a disposal content fee, a subsidy for recyclable designs, unit pricing of household disposal, a deposit-refund system, and a manufacturer `take-back' requirement. In order to identify the problem being addressed, we build a simple general equilibrium model in which household utility depends on a negative externality from total waste generation, and in which firms use primary and recycled inputs to produce output that has two `attributes': packaging per unit output, and recyclability. If households pay the social cost of disposal, then they send the right signals to producers to reduce packaging and to design products that can more easily be recycled. But if local governments are constrained to collect household garbage for free, then households do not send the right signals to producers. The socially optimal attributes can still be achieved by a tax on producers' use of packaging and subsidy to producers' use of recyclable designs.

Suggested Citation

Fullerton, Don and Wu, Wenbo, Policies for Green Design (May 1996). NBER Working Paper No. w5594. Available at SSRN: https://ssrn.com/abstract=4964

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

Wenbo Wu

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

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