Policy options for toxics disposal: Laissez-faire, subsidization, and enforcement

Suggested Subsidies are Sub-optimal Unless Combined with an Output Tax

“…The first two columns show results when the output tax is zero, as in Sullivan [9]. The subsidy rate is zero in the first column, to replicate 9 We have no need to specify separate values for α, γ, and y. Each is an exogenous constant, and we need only their product.…”

“…We assume that x is produced using toxic waste and some other input via Cobb-Douglas production, so the firm's expenditure on waste is a constant share of sales revenue: 7 In addition, results in Bovenberg and de Mooij [1] raise doubts about the kind of excess burden calculation in Sullivan [9]. It is true that subsidies might have to be financed by raising some other distorting tax, like a wage tax, which would reduce the real net wage and reduce labor supply.…”

“…Sullivan [9] builds a computational model and uses it to show how a subsidy to legal disposal can significantly reduce social costs associated with illegal dumping of toxic waste.…”

On second-best policing effort against the illegal disposal of recyclable waste

“…As for illegal waste disposal, Sullivan (1987) derives the optimal enforcement effort of the budget-constrained authority, along with the optimal subsidy for the legal disposal to counter midnight dumping by waste generating producers. Sullivan (1987) resorts to the assumption of 'a rational criminal' a la Becker (1968) in describing the behavior of these producers.…”

How a Fee Per-Unit Garbage Affects Aggregate Recycling in a Model with Heterogeneous Households

“…Fullerton and Kinnaman (forthcoming) allow the price of recycling to vary across goods, but treat all households as identical. Sullivan (1987) and Dobbs (1991) also allow for litter in their models. We present the only model to allow heterogeneous households to choose among three removal methods for diverse types of goods.…”