Circular Economy Innovation and Environmental Sustainability Impact on Economic Growth: An Integrated Model for Sustainable Development

Eglantina Hysa, Alba Kruja, Naqeeb Ur Rehman and Rafael Laurenti
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Naqeeb Ur Rehman: Department of Economics, Epoka University, 1032 Tirana, Albania
Rafael Laurenti: Department of Machine Design, KTH Royal Institute of Technology, Brinellvägen 83, 11428 Stockholm, Sweden

Sustainability, 2020, vol. 12, issue 12, 1-16

Abstract: This study examines the link between selected indicators of a circular economy, including essential components of environmental and economic growth. Developed economies are continuously innovating to promote growth and giving governmental support to the producers to move from linear economies to circular ones. Hence, waste materials in industrial systems are recycled or re-used, improving the efficiency of using finite resources with the no-waste approach. The aim of this paper is the following: (1) to identify the main components of a circular economy, which are also supportive of sustainability and development; (2) to check the impact of these variables in the economic growth of European Union countries; (3) to find out if the three components of sustainable development adopted to circular economy (CE) indicators (environmental–social–economic) are significant to economic growth. We used a fixed effect panel data analysis to identify the circular economy’s impact on the economic growth of European countries. Additionally, to support the results of the regression analysis, we employed a second method—generalized methods of moments—computing the Arellano–Bond dynamic panel data estimation method. The model included five independent variables, such as environmental tax rate, a recycling rate of waste, private investment and jobs in a circular economy, patents related to recycling, and trade of recyclable raw materials. The identification of each variable was made based on a deep search through literature. The results of both econometric models showed a strong and positive correlation between a circular economy to economic growth, highlighting the crucial role of sustainability, innovation, and investment in no-waste initiatives to promote wealth.

Keywords: circular economy; sustainability; innovation; environmental dimension; economic growth; panel data (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (59)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:12:y:2020:i:12:p:4831-:d:370879

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