Optimal policies for international recycling between developed and developing countries

In this paper, we model international recycling in a two-country model, where firms in a Northern, developed country produce goods (such as electronic equipment) and recycle them, compared to firms in a Southern, developing country, which recycle post-consumer products (e-waste) imported from the Northern country. We investigate optimal tax-subsidy scenarios for the following three cases: (1) an on-site disposal economy where international recycling is freely implemented, (2) a return economy where Southern firms' waste is recycled and returned to the North, and (3) an inactive Southern economy where no policy instruments takes place because of administrative shortages. For each of the above three cases, alternative tax-subsidy systems can maximize the social welfare of both countries, which is called a deposit-refund system.