Partners: International Growth Centre, Suntory and Toyota International Centres for Economics and Related Disciplines, Innovations for Poverty Action, DataPlas Ghana

Urbanisation generates powerful agglomeration benefits but also severe congestion externalities that require regulation and public goods provision. In developing megacities, governments lack the fiscal and enforcement capacity to implement textbook solutions. In their absence, unregulated private provision emerges across sectors such as waste, sanitation, water, and transport, leaving externalities largely unaddressed. What can economics offer cities that cannot implement textbook policies? We study whether limited, feasible regulation can leverage informal markets to deliver public services at scale, focusing on trash collection in Accra, Ghana. Using novel data, we document an imperfect but functioning market: households pay informal tricycle collectors for door-to-door collection, yet prices remain too high for universal access, and final disposal occurs largely at illegal dumpsites. We identify a single feasible policy lever—subsidies for formal, environmentally controlled disposal—and evaluate it using a new structural model of urban waste collection and disposal. To estimate the model, we combine survey experiments to elicit household demand, a custom app to record transactions and tricycle routes, and a field experiment randomising dumping fees. Counterfactual results show that a modest subsidy achieves roughly 80% of the efficient outcome, substantially reducing environmental damages while generating larger welfare gains at lower cost than planned infrastructure expansion. These findings demonstrate that even in very low-capacity environments, limited price-based regulation can align informal private initiative with social objectives.