Is taxing waste a waste of time? Evidence from a supreme court decision

Many people are against a garbage tax even though it often works. We study how a Supreme Court decision, mandating Vaud, a region of Switzerland, to implement a tax on garbage, affects garbage production and beliefs about the tax. Our empirical approach exploits that parts of Vaud already implemented a garbage tax before the mandate, allowing us to adopt a difference-in-differences approach. Pricing garbage by the bag (PGB) is highly effective, reducing unsorted garbage by 40% (arc-elasticity of -0.3), increasing recycling of aluminum and organic waste, without negative spill-overs on adjacent regions. We also find that people are very concerned with PGB ex ante, but implementing PGB reduces concerns with effectiveness and fairness substantially. After implementing PGB, people intend to vote for an up to 70% higher garbage tax compared to before PGB. Taxing garbage generates benefits worth 36 % of garbage management costs.

Stefano Carattini, Andrea Baranzini and Rafael Lalive