The diffusion of differentiated waste disposal taxes in the Netherlands

The diffusion of a novel taxing scheme among Dutch municipalities in the period 1998-2005 is studied. In this taxing scheme the waste disposal tax is made dependent on the amount of waste a household produces. Inspecting the pattern of the introduction of this tariff, it seems to be contagious: the probability of introduction is increasing in the number of neighboring municipalities that have already introduced this taxing scheme. A possible rationale is that the tax encourages illegal dumping of waste which in turn might increase the waste of neighboring municipalities (spillover effect). Using panel data it is possible to distinguish between municipal specific effects and the spillover effect. The results indicate the presence of strong spillovers.