The effects of pricing waste generation: A synthetic control approach

To internalize pollution externalities into household waste generation, Unit Pricing Systems (UPS) have been adopted worldwide. This paper evaluates the causal effects of a UPS on the disposal of municipal solid waste in Trento, Italy. Using a unique panel dataset of monthly waste generation in Italian municipalities, we employ the synthetic control method, which allows us to account for possible time-varying effects of unobservables. Our results show that the policy was effective, with a significant decrease of the priced waste stream, unsorted waste, by 37.5%. This effect seems to be largely driven by behavioral changes towards waste avoidance (−8.6%) and possibly by a smaller increase in recycling (+6.1%). By comparing these results to those obtained by a difference-in-differences approach, we show that failing to account for time-varying effects of unobservables may lead to a mismeasurement of policy effects.