The causal impact of economic growth on material use in Europe
2017
Agnolucci, Paolo | Flachenecker, Florian | Söderberg, Magnus
Several scholars and policy-makers have claimed that Europe, and Western Europe in particular, has managed to ‘decouple’ economic growth from material use. We identify and address one major limitation in the existing literature – failure to take the endogeneity of economic growth into account. Based on a panel data-set of 32 European countries from 2000 to 2014, we estimate the causal impact of gross domestic product (GDP) on domestic material consumption (DMC) applying an instrumental variable approach. We use the number of storm occurrences as an instrument for GDP, which we show is both relevant and valid. Our results provide new evidence that increasing the GDP growth rate causes the DMC growth rate to increase for Western Europe, whereas the effect is insignificant for the Eastern European economies and Europe as a whole. As our results partly question current wisdom on the achievements of ‘decoupling’, especially among European policy-makers, we offer two explanations that are consistent with these results.
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