Working Paper: CEPR ID: DP18486
Authors: Peter Egger; Christian Keuschnigg
Abstract: Recycling waste from used goods can substitute for scarce raw materials and reduce resource dependence. We present a model of waste collection, recycling and final goods production using raw and recycled materials. Avoiding environmental damage from non-recycled waste causes costly landfill and creates externalities. An optimal allocation requires a trash tax on producers to pay for costly waste disposal, and an input subsidy to recycling firms to compensate for disposal cost avoidance. Trade between resource poor and resource rich countries involves non-trivial interactionsbetween terms of trade effects and distortions in recycling and resource extraction.
Keywords: waste; recycling; externalities; resource dependence; trade
JEL Codes: D62; Q32; Q53; F18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Recycling (L99) | competitiveness and growth of resource-poor countries (O57) |
| Increased recycling (L99) | reduction in resource dependence (O39) |
| Improvements in recycling technologies (L99) | slowing down the depletion of exhaustible resources (Q32) |
| Trash tax on producers (L99) | incentivizes producers to reduce waste (L99) |
| Trash tax on producers (L99) | investment in recycling processes (L99) |
| Appropriate recycling policies (L99) | welfare gains for resource-poor countries (F63) |