The Diffusion of Local Differentiated Waste Disposal Taxes in the Netherlands

The diffusion of a novel taxing scheme (among Dutch municipalities over the period 1998-2005) is studied in which the waste disposal tax is increasing in the amount of waste a household produces. Inspection of the rise and spread of this tax shows that it is 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 the dumping of waste in neighboring municipalities. These municipalities may then introduce a similar tax to prevent dumping (spillover effect). Using panel data and a recently developed spatial probit approach (Elhorst et al. in J Appl Econom 32:422-439, 2017), it is possible to distinguish this spillover effect from time-specific effects. The results indicate the presence of strong spillovers.