Do Not Trash the Incentive! Monetary Incentives and Waste Sorting
Executive Summary — Many cities encourage residents to sort their domestic trash into separate bins, for the sake of recycling some of it and thus reducing the amount of garbage that ends up in landfills. The problem is that sorting waste is not a fun activity, and not everyone is willing to do it. Using data from 95 municipalities in Italy, this paper discusses whether and how monetary incentives can encourage people to sort their trash. Research was conducted by Alessandro Bucciol of the University of Verona and the University of Amsterdam, Natalia Montinari of the University of Padua and the Max Planck Institute of Economics, and Marco Piovesan of Harvard Business School. Key concepts include:
- The paper discusses the pay-as-you-throw (PAYT) system, in which residents pay lower fees if they sort their trash than if they don't.
- The researchers found that the introduction of a PAYT system had a significant and positive net effect of 12.2 percent on the amount of trash that residents sort. This compares with a positive effect of 18.1 percent for the nonmonetary incentive of letting residents leave sorted bins outside their doors, rather than requiring them to carry their trash to drop-off bins on the street. Thus, the PAYT system is more of a complement than a substitute for the door-to-door collection system.
- However, the PAYT system does not affect the actual amount of waste each household creates. While the system induces residents to sort their trash, it does not induce them to produce less of it.
This paper examines whether monetary incentives are an effective tool for increasing domestic waste sorting. We exploit the exogenous variation in the pricing systems experienced during the 1999-2008 decade by the 95 municipalities in the district of Treviso (Italy). We estimate with a panel analysis that pay-as-you-throw (PAYT) incentive-based schemes increase by 12.2% the ratio of sorted to total waste. This increase reflects a change in the behavior of households, who keep unaltered the production of total waste but sort it to a larger extent. In addition, we show that several factors that may discourage local administrators from adopting PAYT—illegal dumping and higher cost of management—are not important at the aggregate level. Hence, our results support the use of PAYT as an effective tool to increase waste sorting.
- Full Working Paper Text
- Working Paper Publication Date: March 2011
- HBS Working Paper Number: 11-093