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

This paper suggests 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.

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.

EfD Authors

Associate Professor Anthony Leiman Research Fellow
Assoc. Professor Martine Visser Research fellow
Johane Dikgang Junior Research Fellow

Keywords

Centers

south africa

Type of publication

Peer reviewed

Reference

Johane Dikgang, Anthony Leiman and Martine Visser, 2011, Elasticity of demand, price and time: lessons from South Africa's plastic-bag levy, Applied Economics,First published on: 14 June 2011 (iFirst)

Environment for Development

Environment for Development