Welfare Effects of International Trade in Waste

I quantify the welfare effects of international trade in waste. I build a structural gravity model in which waste generation is a byproduct of manufacturing and waste is input to recycling. My estimates reveal that low-value waste is more sensitive to trade barriers than high-value waste, while richer countries import a greater share of high-value waste than low-value waste. Although existing patterns of waste trade make countries of all income levels better off, low-value waste trade, which creates large negative externalities relative to its private value, makes middle-income countries worse off. I estimate that China’s 2018 ban on low-value waste imports made China and several lower-income countries better off. Depending on the type of waste trade banned, manufacturing production across countries also faces differentiated impact. While a high-value waste trade ban hurts manufacturing in rich countries, a low-value waste trade ban reduces the output in lower-income countries