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Small Incentives May Have Large Effects: The Impact of Prices on the Demand for Plastic Bags

Cabrera, José María and Caffera, Marcelo and Cid, Alejandro (2020): Small Incentives May Have Large Effects: The Impact of Prices on the Demand for Plastic Bags.

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Improper disposition of single-use plastic bags causes significant environmental impacts. Awareness of these detrimental effects has increased, according to the number of policies to reduce the consumption of plastics bags implemented worldwide. Yet, impact evaluations of these initiatives are scarce. This is particularly true for evaluations of the impact of levies on plastic bags. In this paper, we quantify, for the first time, the impact of pricing disposable plastic bags on the quantity used over a one-year time window with respect to a pre-treatment period of no regulation. Specifically, we evaluate the effect of different prices on the number of single-use plastic bags used by customers of a national supermarket chain, before and after it implemented a staggered rollout across the country. Using a difference-in-difference identification strategy, we estimate a sizable drop in the demand of single-use plastic bags in the range of 70% to 85%, compared to the control group of branches that did not price plastic bags. These estimates do not change in magnitude and are statistically robust to (i) different specifications of our basic equation, (ii) the use of synthetic controls as an alternative identification strategy, (iii) the estimation of anticipation effects, and (iv) placebo tests. We do not find evidence consistent with the effect been driven by a loss of sales. Our estimates are consistent with the evidence of large elasticities around zero prices found in other settings.

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