The effects of circular economy on economic growth: A quasi-natural experiment in China

Abstract

This study aims to assess the impact of circular economy on economic growth. In the process of rapid economic growth, China has been facing with the pressure of insufficient supply of resources and environmental pollution, which makes the development model of circular economy (CE) an imperative transformation. China has carried out two batches of CE pilot cities to promote the construction of ecological economy and change the traditional economic development model, which is employed as a quasi-natural experiment in this study. The effect of this CE policy on the local economic growth is explored using the Propensity Score Matching (PSM) method and Difference-in-Differences (DID) model and a panel data of 163 Chinese cities from the year of 2001–2012 has been used. The results show that the growth rate of GDP of the pilot cities decreases significantly but the economic decline gradually recovers as time goes on. In addition, this study further conducts the regional heterogeneity analysis to compare the economic growth of CE pilot cities in three economic zones, i.e., eastern, central and western economic zones, and the sectoral heterogeneity analysis to compare the economic growth of three main industries, i.e., primary, secondary and tertiary industries. Finally, discussion of above results is presented and recommendations for the promotion of urban CE are proposed.