Socioeconomic Challenges and Determinants of Shifting To a Circular Economy: An Empirical Study Based On German Data

The transition toward a circular economy is increasingly viewed as a response to major socioeconomic challenges, including resource scarcity, environmental degradation, and sustainable growth. The aim of this study is to identify the key determinants of circular material use (CMU) in Germany. Using annual data for 2004–2022 from Eurostat, the European Environment Agency, OECD, and the European Patent Office, we developed a multifactor econometric model incorporating GDP per capita, domestic material consumption, recycling rates, environmental R&D expenditure, patent activity in waste management, and trade in secondary raw materials. The results demonstrate that economic capacity and innovation – reflected in GDP growth, R&D investments, and patent activity – are the strongest drivers of circularity, while higher domestic material consumption reduces CMU. Recycling performance shows a positive but limited effect, revealing structural inefficiencies in reintegrating secondary materials into domestic production. Trade in secondary raw materials presents a paradox: although it supports EU-level circularity, it constrains national reuse potential. The findings highlight that addressing these dynamics is essential for designing policies that foster innovation-driven circularity, strengthen domestic material loops, and mitigate socioeconomic challenges in the long term.