Giving Plastic Bags the Sack : The Hidden Costs of Changing Behavior

Governments often enact policies to incentivize consumers away from behaviors with negative externalities, at the expense of consumer convenience. Understanding the nonmonetary costs consumers face has implications for social welfare evaluation and policy design; however, quantifying these costs is not always feasible. In this paper, I precisely identify and measure a hidden time cost of an increasingly popular environmental policy aimed at altering behavior—the regulation of disposable carryout bags (DCB). Using variation in local government DCB policy adoption in California from 2011–2014 as a quasi-experiment, together with high-frequency scanner data from a national supermarket chain, I employ an event study design to quantify the effect of DCB policies on the wait and processing time of checkout services provided by supermarkets. I find that DCB policies cause a 3% increase in transaction duration, which persists over the entire sample period. Given the capacity constrained queuing system of supermarket checkout, the 3% slowdown of individual customers compounds into an even larger congestion externality— with DCB policies leading to an average additional 1.09 minutes of wait and processing time per customer. Aggregating to the state-level, a statewide DCB policy would cost Californians 25.8 million hours annually. This paper extends the literature on the hidden costs of changing behavior as the first i) to quantify the time cost of a policy change separately from other non-monetary costs, ii) to examine how this recurring cost evolves as behaviors and habits adjust to the policy, and iii) to focus on a policy and setting where capacity constraints determine whether retailers or customers bear the incidence of the time cost. The results have implications for the design of policy incentives, and show that ignoring time costs, as well as institutional constraints, may overstate the welfare gains from policy-induced behavioral change. ∗Agricultural and Resource Economics; University of California, Berkeley. Phone: 513-600-5777 (cell). Email: becca.taylor@berkeley.edu. I am indebted to Sofia Berto Villas-Boas, Peter Berck, Hilary Hoynes, and David Zilberman for their continuous encouragement and guidance. I also thank Michael Anderson, Maximilian Auffhammer, Kendon Bell, Joshua Blonz, Fiona Burlig, Aluma Dembo, Meredith Fowlie, Daley Kutzman, Jeffrey Perloff, Louis Preonas, John Schindler, and Andrew Stevens as well as the participants of the UC Berkeley ERE seminar and the WEAI Graduate Student Dissertation Workshop, for helpful discussions and suggestions. I thank Kate Adolph, Katherine Cai, Samantha Derrick, Tess Dunlap, Valentina Fung, Claire Kelly, Ben Miroglio, Nikhil Rao, Lucas Segil, Corinna Su, Edwin Tanudjaja, and Sarah Zou for their superb research assistance. This project would not be possible without the institutional and technical support of the retailers that provided data and access to their stores. This project was conducted with generous support from the NSF Graduate Research Fellowship Program and the Giannini Foundation. All errors are my own. Giving Plastic Bags the Sack