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Elasticity of demand, price and time: lessons from South Africa's plastic-bag levy

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Policy makers in many countries have perceived plastic-bag litter as a problem, and have used a variety of regulatory tools to address it. South Africa's current legislation on plastic-bags came into effect on 7 May 2003. It increased the thickness of the plastic used, charged a small levy and required that bags be sold rather than distributed gratis. These regulations sharply reduced consumption of plastic bags in the short term, but unlike the Irish and Danish levies have failed to curb their use meaningfully in the long run. It is suggested that the initial sharp fall in use of bags was a result of loss aversion rooted in an endowment effect (the bags having long been a free good). Once consumers became accustomed to paying for bags, demand slowly rose to its historic levels.
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Keywords: Q53; Q58; demand; elasticity; levy; plastic-bag; price

Document Type: Research Article

Affiliations: Environmental-Economics Policy Research Unit (EPRU), School of Economics,University of Cape Town, Cape Town, South Africa

Publication date: 2012-09-01

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