Dynamics of material consumption on economic growth: investigating resource inefficiency within the European Union
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,Domestic material consumption (DMC) is often linked to economic growth, but it also remains a significant source of climate change, as identified within the twelfth sustainable development goal (SDG12) by the United Nations. This led us to the research question: ‘What is the reason for the slow progress in SDG12 (responsible consumption and production), and can the impact of material consumption on economic growth explain why countries have found it challenging to achieve progress in this area?’ The recent adverse climate conditions make this DMC growth nexus question the more pertinent. To investigate further, we made use of data on material consumption by the 28 European Union member states (EU28).
The data used covered all 28 EU member states over the period 2007–2017. Measures used to proxy for key material consumption and macroeconomic indicators included: labour force, population, trade openness, research and development (R&D), real gross domestic product (GDP) and lagged real gross domestic product (lagged GDP).
Three key indicators to proxy for the level of material usage or extraction in a country are used, namely: domestic material consumption (DMC), domestic material input, and domestic material extraction. Note that all the material measures are captured at the per capita level, while the other regressors such as trade openness, exports, imports, are captured as a ratio of GDP.
We start by looking at countries based on high levels of material consumption relative to those with low levels of material consumption, vis-à-vis expected productivity from such material usage. It becomes immediately clear that, over the past decade, one country has consistently ranked high on the domestic material consumption level among the EU28, albeit without the expected productivity levels to show for it.
In more detail, findings show that countries with high levels of domestic material consumption (Ireland included), as proxied by the resource productivity index, tend to have a relatively lower impact of material use on economic performance. This suggests that countries, such as Ireland, that have been less efficient in their use of domestic materials, also experience a lesser impact of material use on economic performance, which can lead to a dangerous cycle of inefficiency. Furthermore, there is a strong and positive relationship between economic growth and domestic material exploitation across all EU28 member states. This suggests that any policies targeted at the regulation of domestic material exploitation in the EU should take the strong linkage between material exploitation and economic growth into consideration, prior to implementation. These results are summarized in Tables 1 and 2.
- Countries with high resource productivity index scores (Table 1), have a lower impact of DMC on economic growth, than higher-ranked countries on the resource productivity list.
- Lower ranked SDG12 countries (Table 2) have significant material usage effect on growth, whereas, with higher-ranked countries, material usage does not seem to have an effect.
The full article is available for download in the working paper series titled below, including a reference section:
Is Resource Inefficiency Self-Reinforcing? Evidence From the European Union
Cite as:
Fadiran, David, and Gideon Fadiran. “Is Resource Inefficiency Self-Reinforcing? Evidence From the European Union.” Evidence From the European Union (November 30, 2020) (2020).
