Does Waste Management Policy Crowd out Social and Moral Motives for Recycling?

In this paper, we consider households' decision of whether to recycle within a theoretical framework that allows for the inclusion of social and moral motivations. The former comes from valuing social approval while the latter comes from valuing self-image. In the context of our theoretical framework, we introduce a unit pricing system and, separately, mandatory recycling and analyze how each affects the equilibrium in terms of whether a society recycles. We show that a unit pricing system enhances the effect of intrinsic motivation (there is crowding in) while mandatory recycling erodes it (there is crowding out) provided that the marginal utility of self-image falls short of the cost of recycling relative to the environmental benefit of living in a society in which everyone recycles. If mandatory recycling is accompanied by an improvement in recycling services that applies to all recyclables and not just the mandated recyclables, crowding out becomes less likely to occur; if the improved services only apply to the mandated recyclables, there is however no effect on the potential for crowding out. Using an international household-level data set, we find support for the hypothesis that mandatory recycling can lead to crowding out while unit pricing does and, to some extent, can relate the potential for crowding out to higher recycling costs.