Journal of Regulatory Economics

, Volume 55, Issue 3, pp 282–306 | Cite as

The curse of low-valued recycling

  • Hiroaki InoEmail author
  • Norimichi Matsueda
Original Article


This paper discusses how to deal with low-valued recyclable wastes whose reprocessing itself does not pay financially. While such a recycling activity can potentially improve social welfare if the social costs associated with their disposal are sufficiently significant, governmental policies to promote recycling may lead to illegal disposal. Explicitly considering the monitoring cost in preventing firms from disposing of collected wastes illicitly, we show that the second-best policy for a low-valued recyclable is either one of the two following schemes: a deposit-refund scheme (DRS) that gives birth to a recycling market and an advanced-disposal fee that does not create a recycling market. However, in order to select the optimal policy scheme and implement it appropriately, a policymaker needs information available only in the recycling market. Thus, the structure of the second-best policy itself entails critical information issues in its implementation, which is in stark contrast to a DRS for a non-low-valued recyclable.


Hazardous and household solid waste Illegal waste disposal Enforcement Compliance Government-induced recycling Optimal taxation 

JEL Classification

H21 Q21 Q28 



The authors thank useful comments by an anonymous referee of this journal, Jiro Akita, Alain Ayong le Kama, Paul Calcott, Etienne Farvaque, Ida Ferrara, Lionel Ragot, Hiroaki Sakamoto, Akihisa Shibata, Takayoshi Shinkuma, Hide-Fumi Yokoo, the participants of workshops at the Victoria University of Wellington, Kyoto University, Kwansei Gakuin University, the 15th Annual Meeting of the Association for Public Economic Theory at the University of Washington (Seattle), the 21st Annual Conference of the European Association of Environmental and Resource Economists at the University of Helsinki, the 15th Journées Louis-André Gérald-Varet (International Conference in Public Economics) in Aix-en-Provence, and the 26th Annual Conference of the Canadian Resource and Environmental Economists in Banff, Alberta. The usual disclaimer applies. This work was supported by JSPS KAKENHI (23730260 and 25285087).


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.School of EconomicsKwansei Gakuin UniversityNishinomiyaJapan

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