'Pay as you own' or 'pay as you throw'? A counterfactual evaluation of alternative financing schemes for waste services

Italian municipalities finance waste services by applying either a general property tax ("pay-as-you own"system, PAYO) or, less frequently, a fee calibrated to the waste produced by each household ("pay-as-you throw"system, PAYT). The aim of this paper is to estimate what would be the impact of a massive implementation of PAYT schemes. We gather information for a panel of Italian municipalities, covering a ten years time span, in order to assess the impact of switching from PAYO to PAYT on both the amount of waste generated by households and the cost for waste services. Our empirical strategy is based on a IV 3SLS cost model in a counterfactual setting and deals with the simultaneous determination of the demand and supply side of waste services, also taking into account the cross dependency among sorted and unsorted waste. Our results show that the adoption of PAYT schemes brings a simultaneous significant reduction in both quantity and cost, especially for unsorted waste.