TY  - JOUR
AU  - Fullerton,Don
AU  - Wolverton,Ann
TI  - Two Generalizations of a Deposit-Refund System
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7505
PY  - 2000
Y2  - January 2000
UR  - http://www.nber.org/papers/w7505
L1  - http://www.nber.org/papers/w7505.pdf
N1  - Author contact info:
Don Fullerton
Department of Finance
University of Illinois
BIF Box#30 (MC520)
515 East Gregory Drive
Champaign, IL  61820
Tel: 217/244-3621
Fax: 217/244-3102
E-Mail: dfullert@illinois.edu

Ann Wolverton
National Center for Environmental Economics
U.S. Environmental Protection Agency
1200 Pennsylvania Ave., NW
MC 1809T
Washington, DC 20460
E-Mail: wolverton.ann@epamail.epa.gov
AB  - This paper suggests two generalizations of the deposit-refund idea.  In the first, we apply the idea not just to solid waste materials, but to any waste from production or consumption including wastes that may be solid, gaseous, or liquid.  Using a simple general equilibrium model, we derive the optimal combination of a tax on a purchased commodity and subsidy to a clean' activity (such as emission abatement, recycling, or disposal in a sanitary landfill).  This  two-part instrument' is equivalent to a Pigovian tax on the  dirty' activity (such as emissions, dumping, or litter).  In the second generalization, we consider the case where government must use distorting taxes on labor and capital incomes.  To help meet the revenue requirement, would the optimal deposit be raised and the refund reduced?  We derive the second-best revenue-raising DRS or two-part instrument to answer that question.
ER  -