Economics of Recycling

Abstract

In chapter 1 we focus on the relationship between environmental abatement and real GDP, while it is the first paper to study empirically this relationship. The analysis is based on a nonparametric model that allows for two-way fixed effects to eliminate the bias arising from two sources. We use data for fifty States of the United States and for the years between 1988 and 2017, as well as data for the OECD countries and for the years 1985 to 2017. A comparison between the nonparametric and two parametric models (linear and quadratic) is also captured by this study, showing that in every case the nonparametric model is the suitable one. We find evidence that this relationship is characterized by an increasing curve which confirms the existence of a J curve, a finding that also agrees with recent theoretical models. Chapter 2 examines the Environmental Kuznets Curve (EKC) in the context of a circular economy recycling model. Our model assumes that there are only two factors of production in the production of the final good, a recyclable and a polluting input. We also present two extensions of this model by adding technological progress in the production of the polluting input and a dynamic reduction of the influence of the same input respectively. Our results suggest the presence of an inverse U shape EKC confirming the findings of the main EKC literature, as well as an increasing curve for the recycling output Finally, chapter 3 focuses on a novel theoretical circular economy model which explains the relationship between pollution and output as well as recycling and output in the context of the EKC framework, incorporating in the analysis the habit formation theory. The model is also extended to account for a dynamic relationship between habit stock and the intensity of recycling, as well as to capture the effects of technological progress on both curves. All models find an increasing pattern for the recycling output curve and a downward sloping curve for the EKC, results which are in agreement with the general patterns of these curves supported by the literature.