Circular Economies and Sectoral Green Productivity in the European Union

Abstract

In this study, we explore the impacts of the waste recycling ratio as a proxy for circular economies on sectoral productivity in the European Union between 2000 and 2021. We present a productivity model that contextualizes the industry's transition to green economies, namely, the green productivity model, in which we adapt neoclassical productivity models by considering energy intensity and the development of green technologies. After estimating the results using FGLS and PCSE, we understand that a higher availability of secondary raw materials contributes to the European productivity functions in different industries, but this effect is limited as exponential increases in these materials reduce productivity. To ensure the efficiency of policies aimed at consolidating circular economies, we propose policy recommendations that leverage economies of scale and scope to improve the efficiency of European industries while contributing to the circular cycle of their own productivity externalities.