Institutional determinant of consumption-side circular economy performance : evidence from European Union countries

Abstract

The circular economy has become central to European Union sustainability policy, yet most research focuses on production-side transitions industrial ecology, business model innovation, and material flows while the institutional conditions shaping consumption-side outcomes remain underexplored. Drawing on institutional economics, this thesis investigates whether government effectiveness influences consumption-side circular economy performance across the EU from 2000 to 2023, using municipal waste generation per capita and recycling rates as dependent variables. The results reveal an asymmetric institutional effect. Government effectiveness has no statistically significant impact on per capita waste generation, suggesting that governance quality alone is insufficient to reduce consumption-driven waste. For recycling, the relationship is temporally contingent: no significant governance effect is detected before 2015, but after the adoption of the Sustainable Development Goals and the EU Circular Economy Action Plan, a one-unit improvement in government effectiveness is associated with a 4.81 percentage-point increase in recycling rates (p = 0.003). This indicates that binding policy frameworks activated a governance-recycling channel that was not previously detectable. These findings imply that institutional capacity shapes circular economy outcomes unevenly enabling coordination-dependent outcomes such as recycling but remaining limited in its influence over aggregated individual consumption behavior. The study concludes that strengthening institutional capacity for recycling must be complemented by upstream regulatory and market-based strategies to address waste prevention where governance alone falls short.