Skipping the Bag: The Intended and Unintended Consequences of Disposable Bag Regulation

Regulation of goods associated with negative environmental externalities may decrease consumption the targeted product, but be ineffective at reducing externality itself if close substitutes are left unregulated. We find evidence that plastic bag bans, most common disposable regulation in US, led retailers to circumvent by providing free thicker bags which not covered ban. In contrast, a change replaced ban small tax on all generated large decreases use and overall costs. Our results suggest narrowly-defined regulations (like bans) less effective than policies target more comprehensive set products, even case when policy instrument (a rather ban) is as strict.