Flow Control and Rent Capture in Solid Waste Management

This event study examines the effect of the U.S. Supreme Courtʹs May 1994 ruling that flow-control laws are unconstitutional on the $30 billion a year solid waste industry. Flow-control ordinances were enacted ostensibly to help finance the construction of multimillion dollar waste-to-energy facilities by ensuring supplies of solid waste and were challenged in court by waste hauling and landfill firms. Owing to large standard errors, I fail to reject the null hypothesis that the Supreme Court decision did not have significant effects on the expected profits of either hauling–landfill or waste-to-energy firms. This is consistent with relatively easy entry into hauling–landfilling and local government capture of any supernormal profits in waste-to-energy due to flow control. It suggests that the actual casualty of the repeal of flow control may be the ability of local governments to provide additional waste-related services, including household hazardous waste collection and curbside recycling.