Effects of Unit-Based Garbage Pricing: A Differences-in-Differences Approach

Using a unique 10-year dataset of all 458 Dutch municipalities, we apply a differences-in-differences approach to estimate the effect of unit-based pricing on household waste quantities and recycling. Community-level studies of unit-based pricing typically do not include fixed effects at the local level. We find that failure to do so may substantially inflate the estimated price effect. We also find that unit-based pricing may be endogenous, and use instrumental variables to account for this. Our analysis shows that user fees depend on user fees in neighboring jurisdictions (policy interaction). Our estimate of the garbage reduction per $1 user fee is lower than any previous estimate bar one. The price effect depends on the pricing system: weight-based systems reduce garbage quantities more than volume-based systems. User fees increase recycling, especially of paper, but not nearly as much as they reduce garbage quantities. We find no evidence for waste tourism or illegal dumping.