Good Intentions, Informal Outcomes: The Formalization Trap in Global E-Waste Markets

Jessica Coria

No 12471, CESifo Working Paper Series from CESifo

Abstract: Large volumes of e-waste collected under formal schemes in high-income countries are still processed informally in developing ones, despite continuous policy efforts to reverse this trend. This paper shows that the persistence of informal e-waste processing is a consequence of how global waste flows interact with domestic market structure. I develop a two-country model in which a cost-minimizing broker exports low-value fractions of e-waste to a poorer country, where informal dismantlers and licensed recyclers compete to purchase material from local collectors. Because formal facilities incur fixed-capacity costs, their competitiveness depends on achieving sufficiently high-value throughput. Low-value exports from the rich country increase total inflows but depress the effective high-value throughput and dilute domestic subsidies, keeping average costs high and allowing informal dismantlers to outbid formal recyclers. The model generates a formalization trap with multiple equilibria and explains why widely used policies, including per-unit subsidies, capital support, higher recycling targets in rich countries, and integration of informal collectors into formal systems, often fail to trigger a transition toward formal treatment.

Keywords: electronic waste; Informality; recycling and waste management; international trade in waste; formalization traps; developing countries (search for similar items in EconPapers)
JEL-codes: F18 O17 O19 Q53 Q58 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12471

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