Efficient Management of Household Solid Waste: a General Equilibrium Model

Abstract

In the context of a dynamic general equilibrium model, the authors develop an efficient system of Pigovian taxes and refunds reflecting disposal and recycling costs. This system would lead to both efficient disposal and recycling, replacing existing inefficient schemes that rely on volume-based fees and/or lump-sum taxes. The authors show that excise taxes as well as government-mandated refunds for recycling are required for efficiency. They also propose a method of implementation in which private recycling markets arise in response to tax/refund incentives.