In this paper we consider a competitive economy with flows of materials from extraction via recycling to landfilling which exhibits distortions due to pollution, external landfilling costs and inefficient product design. The allocative impact of tax-subsidy policies aiming at internalizing the distortions are analyzed when the pertinent tax-subsidy rates were successively raised from zero toward their efficiency restoring levels. Promoting recyclability by greening the product design stimulates recycling as expected. But it also increases primary material extraction and - possibly - the total waste flow, and it reduces the recycling ratio.
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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number
CESifo Working Paper No. 350.
Find related papers by JEL classification: H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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