The Effect of Income on Recycling Behavior in the Presence of a Bottle Law: New Empirical Results

Eleven U.S. states have enacted “bottle laws” and they are one of the few examples of a policy that takes advantage of the price system to ameliorate environmental damage. A deposit-refund program on beverage containers is a consumption tax combined with a disposal rebate that is the equivalent of a Pigouvian tax. Using individual level data I have collected on observed cash recycling behavior, this paper shows that an unintended consequence of bottle laws is that they have the potential to increase the incomes of very low wage workers. If states set the bottle deposit high enough, harvesting recyclables becomes viable employment. The use of a price system as an environmental remedy is often criticized on the grounds that it leads to lower incomes for the poor. In this case deposit-refund recycling laws may provide a way to improve resource allocation using the appropriate Pigouvian tax, and simultaneously provide a way to increase the income of low wage workers. The first section of this paper I estimate the determinants of recycling behavior in the presence of a bottle law. This provides some insights into the characteristics of those who cash recycle. In particular I find that low income households are much more likely to recycle for cash than are high income households. The second section of this paper uses the dataset of recyclers to examine the importance of recycling income to low income households. The data show the surprising result that recycling income does indeed provide a substantial supplemental income to a certain group of low-income cash recyclers.