Market behavior and policy in the recycled paper industry: A critical survey of price elasticity research

The objectives of this paper are to: (a) provide a critical survey of existing econometric analyses of supply and demand elasticities in recycled paper markets and (b) discuss a number of implications of the results from this work. Specifically, the survey adds to our understanding of the functioning of recycled paper markets, points towards some important policy lessons, and identifies gaps in the economic literature on recycled paper market behavior. The analysis builds on the scope, methodology and data used by 21 previous studies, which all estimate the own-price elasticities of recycled paper demand and/or supply. One key finding is that the own-price elasticity of recycled paper supply is positive but low (around 0.20–0.30). This helps explain the often high price volatility in recycled paper markets, and carries important implications for the impacts of, and the choice between, price- and quantity-based waste management policies. Finally, the analysis also suggests that future research should devote increased attention to different non-environmental market imperfections (e.g., market power, information asymmetries) that could discourage the uptake of recycled materials in the market place. A stronger research focus on recycled paper use in developing countries, not the least China, is also needed.

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