Resource Efficiency and Economic Resilience: Panel Evidence from the European Union

This study examines how economic growth in EU member states relates to the performance of the circular economy. Using panel data from 16 EU countries between 2013 and 2023, it explores the link between GDP per capita and five circular economy indicators: material footprint, municipal waste recycling rate, circular material use rate, value added and private investment in circular economy sectors, and greenhouse gas emissions. The study uses a two-way fixed-effects panel model that accounts for both common macroeconomic shocks and country-specific factors, thereby improving the reliability of the results. To reduce the risk of reverse causation and better reflect the timing of economic effects, all explanatory variables are included with a one-year lag. The results show that the material footprint later has a negative correlation with GDP per capita, indicating that economic success may be constrained by increasing resource intensity. On the other hand, when accounting for structural nation differences and time effects, recycling rate, circular material use, private investment in circular industries, and greenhouse gas emissions do not exhibit statistically independent impacts. Overall, the findings imply that increasing resource efficiency may correlate more strongly with economic performance than increasing recycling or circular investment alone. In the European Union, these findings add to ongoing policy debates about the financial effects of circular economy policies.