Growth in a Circular Economy

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URI: http://hdl.handle.net/10900/115120
http://nbn-resolving.de/urn:nbn:de:bsz:21-dspace-1151204
http://dx.doi.org/10.15496/publikation-56495
Dokumentart: Aufsatz
Date: 2021-04-14
Source: University of Tübingen Working Papers in Business and Economics ; No. 145
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Economics
Other Keywords:
circular economy
economic growth
natural resources
recycling
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Abstract:

We present a model of natural resources and growth that stresses the influence of an incomplete circularity of exhaustible natural resources. In particular, we analyze the recycling process and the material balance principle, two fundamental aspects of a circular economy. When market failures arise or complete recycling is not possible for technical reasons, then the equilibrium outcomes in terms of output, consumption, and prices for the material inputs are distorted compared to the socially optimal solution. However, the introduction of a market for waste and a system of subsidies/taxes on virgin and recycled resources enables an internalization of the externalities. The importance of technological progress in order to foster “circularity”, i.e. both to improve resource efficiency in the production process and to enhance the backflow of materials from waste to production, is highlighted.

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