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Two Generalizations of a Deposit-Refund Systems

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  • Ann Wolverton
  • Don Fullerton

Abstract

This paper suggests two generalizations of the deposit-refund idea. In the first, we apply the idea not just to solid waste materials, but to any waste from production or consumption including wastes that may be solid, gaseous, or liquid. Using a simple general equilibrium model, we derive the optimal combination of a tax on a purchased commodity and subsidy to a clean' activity (such as emission abatement, recycling, or disposal in a sanitary landfill). This two-part instrument' is equivalent to a Pigovian tax on the dirty' activity (such as emissions, dumping, or litter). In the second generalization, we consider the case where government must use distorting taxes on labor and capital incomes. To help meet the revenue requirement, would the optimal deposit be raised and the refund reduced? We derive the second-best revenue-raising DRS or two-part instrument to answer that question.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Ann Wolverton & Don Fullerton, 2000. "Two Generalizations of a Deposit-Refund Systems," American Economic Review, American Economic Association, vol. 90(2), pages 238-242, May.
  • Handle: RePEc:aea:aecrev:v:90:y:2000:i:2:p:238-242
    Note: DOI: 10.1257/aer.90.2.238
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    References listed on IDEAS

    as
    1. Fullerton, Don & Wolverton, Ann, 2005. "The two-part instrument in a second-best world," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1961-1975, September.
    2. Bovenberg, A. L. & van der Ploeg, F., 1994. "Environmental policy, public finance and the labour market in a second-best world," Journal of Public Economics, Elsevier, vol. 55(3), pages 349-390, November.
    3. Fullerton Don & Kinnaman Thomas C., 1995. "Garbage, Recycling, and Illicit Burning or Dumping," Journal of Environmental Economics and Management, Elsevier, vol. 29(1), pages 78-91, July.
    4. Fullerton, Don, 1997. "Environmental Levies and Distortionary Taxes: Comment," American Economic Review, American Economic Association, vol. 87(1), pages 245-251, March.
    5. Walls, Margaret & Palmer, Karen, 2001. "Upstream Pollution, Downstream Waste Disposal, and the Design of Comprehensive Environmental Policies," Journal of Environmental Economics and Management, Elsevier, vol. 41(1), pages 94-108, January.
    6. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, March.
    7. Ronnie Schöb, 1997. "Environmental Taxes and Pre-Existing Distortions: The Normalization Trap," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(2), pages 167-176, May.
    8. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 157-183, August.
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    Cited by:

    1. Renan-Ulrich Goetz & Yolanda Martínez, 2013. "Nonpoint source pollution and two-part instruments," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 15(3), pages 237-258, July.
    2. Fabio Antoniou & Roland Strausz, 2014. "The Effectiveness of Taxation and Feed-in Tariffs," CESifo Working Paper Series 4788, CESifo Group Munich.
    3. Walls, Margaret, 2011. "Deposit-Refund Systems in Practice and Theory," Discussion Papers dp-11-47, Resources For the Future.
    4. Benno Torgler & Maria A. Garcia-Valinas & Alison Macintyre, 2012. "Justifiability of Littering: An Empirical Investigation," Environmental Values, White Horse Press, vol. 21(2), pages 209-231, May.
    5. Hamilton, Stephen F. & Sproul, Thomas W. & Sunding, David & Zilberman, David, 2013. "Environmental policy with collective waste disposal," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 337-346.
    6. Benno Torgler & Bruno S. Frey & Clevo Wilson, 2007. "Environmental and Pro-Social Norms: Evidence from 30 Countries," CREMA Working Paper Series 2007-10, Center for Research in Economics, Management and the Arts (CREMA).
    7. Bevin Ashenmiller, 2009. "Cash Recycling, Waste Disposal Costs, and the Incomes of the Working Poor: Evidence from California," Land Economics, University of Wisconsin Press, vol. 85(3), pages 539-551.
    8. Lori Bennear & Robert Stavins, 2007. "Second-best theory and the use of multiple policy instruments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(1), pages 111-129, May.
    9. Lawrence H. Goulder & Ian W. H. Parry, 2008. "Instrument Choice in Environmental Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 152-174, Summer.
    10. Thomas Eichner & Rüdiger Pethig, 2003. "Corrective Taxation for Curbing Pollution and Promoting Green Product Design and Recycling," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(4), pages 477-500, August.
    11. Ino, Hiroaki, 2011. "Optimal environmental policy for waste disposal and recycling when firms are not compliant," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 290-308, September.
    12. Hiroaki Ino, 2007. "Extended producer responsibility in oligopoly," Economics Bulletin, AccessEcon, vol. 17(6), pages 1-9.
    13. Erin T. Mansur, 2011. "Upstream versus Downstream Implementation of Climate Policy," NBER Chapters,in: The Design and Implementation of U.S. Climate Policy, pages 179-193 National Bureau of Economic Research, Inc.
    14. David McEvoy, 2013. "Enforcing compliance with international environmental agreements using a deposit-refund system," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 13(4), pages 481-496, November.
    15. Rob Aalbers & Herman Vollebergh, 2008. "An economic analysis of mixing wastes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(3), pages 311-330, March.
    16. Walls, Margaret & Calcott, Paul, 2000. "Policies to Encourage Recycling and "Design for Environment": What to Do When Markets are Missing," Discussion Papers dp-00-30, Resources For the Future.
    17. Torgler Benno & Frey Bruno S. & Wilson Clevo, 2009. "Environmental and Pro-Social Norms: Evidence on Littering," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-41, April.
    18. repec:ebl:ecbull:v:17:y:2007:i:6:p:1-9 is not listed on IDEAS
    19. Fikret Adaman & Ayse Mumcu, 2011. "Collective Sanctions as a Remedy to the Household Waste Problem," Working Papers 2011/03, Bogazici University, Department of Economics.

    More about this item

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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