Is it better (healthier) for the lawn if rake and dispose of lawn clippings or if you leave them on the lawn to decompose and return to the soil?
3 Answers
As with most horticultural type questions, there's no simple yes or no answer to this. If you leave the cuttings, then nutrients are returned to the soil, drought resistance is improved, moss is inhibited and you are saved the task of taking the clippings away.
But there are disadvantages - if the turf is weedy, then you're likely to increase the number of weeds by leaving the clippings. In damp weather or damp regions, the turf becomes spongy and susceptible to disease, and aeration is impeded. Also, if the cuttings are very long, they form a layer over the whole lawn, which not only looks awful, but takes longer to break down.
In the UK, which is obviously pretty damp most of the time, the general advice is to let the clippings fly when the weather is hot and dry, but to collect them the rest of the time.

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1I should have added that this is in Arizona - didn't realize that would make a difference... – Guy Sep 04 '12 at 15:29
I always recommend leaving the clippings on the lawn and I've had good luck with it myself. As Bamboo says, there are disadvantages to this. I would add that a good set of mulching blades is a good idea if doing this as smaller bits will decompose more quickly. Also, don't let the grass get too tall between cuttings or over-fertilize as this could lead to thatch problems. Fertilizing promotes quick growth, which means more cutting, which means you may end up adding clippings to the lawn much faster than they can decompose, leading to a buildup. That buildup is thatch. When this problem is detected however, you could bag for a few cuts to let the process catch up.

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Bamboo is right, there's no cut and dry answer - although cut and dry is a good summary of my answer.
Cut it, collect it, compost it and then return it to the lawn. You'll need to compost it with other fine materials (ie not whole corn cobs). I have a nice little pile in a corner of my yard that's part leaves and part cut grass (mowed leaves, it's easier than racking). It's composting nicely and I intend to recycle it into my lawn to fill in some low points.
On the plus side:
- Avoid thatching
- Avoid unsightly grass piles on my pretty lawn
- Any weeds can easily be removed from my compost pile.
The down side is:
- It's more work to collect that leave it on the lawn.
- You need a bit of room for your compost
- It can take a while to break down
There's plenty on this site about making a rich compost and they almost always include lawn clippings. Throwing them away would be a waste!