Measuring the Effects of Increasing Circularity in the Economy Through Recycling

The circular economy is a productive and consumption paradigm, aimed at reducing resource utilization and waste generation. By looping materials and resources and extending the life cycle of durable goods, the environmental impact of human activities is reduced. This paper contributes to understanding the effects of the increment of recycling activities (a subset of circular activities), on production, employment, and the environment in a developing country with a large informal labor sector. The analysis is based on an enhanced input-output matrix or waste input-output matrix (WIO), within a hybrid (including monetary and physical transactions) model accounting for the recycling sectors interlinking with the rest of the economy and final consumption. The study quantifies some of the effects of accomplishing the Paris Agreement Commitments recycling goals, showing emission reductions and job creation in the recycling sector. Also, the results show not-so-obvious effects of partial substitution of virgin raw material production by recycled materials, on total employment quantity and quality (gender, age, or formality composition) in the context of a prevalent informal labor market in recycling activities.