Decoupling gross domestic product and consumption of raw materials: A macro-panel analysis

Abstract

Over the last decades, industrializing countries have experienced economic growth, which coincided with an increase in the use of materials. In a finite world in terms of materials, the consumption of resources and the link with economic development is a challenge for economies. While most of literature relative to Material Kuznets Curve (MKC) and Environmental Kuznets Curve refers to the work of Grossman and Krueger (1991), the theory of inverted U-shaped consumption is older and can be traced from the work of Malenbaum (1978). Using a new indicator, the material footprint (MF), we want to estimate the material footprint-GDP per capita elasticity. To do so, we compare for the first-time four different methodologies and two classes of econometric models (robust to reverse/simultaneous causality) in the same empirical study. We find neither sign of absolute decoupling between GDP and raw material consumption nor saturation of the demand for raw material. This conclusion does not change when we observe subcomponents of MF or other indicators like Domestic Material Consumption or Domestic Extraction. Therefore, in the current state, our economies and the way we achieve economic development are not compatible with finite natural resources.