Institutional Thresholds for an Inclusive Circular Economy Transition: A Global Analysis of Inequality and Labor

The transition to a circular economy creates winners and losers, challenging the assumption that green growth is inherently inclusive. While environmental benefits are documented, the distributional consequences remain poorly understood. This study analyzes how socioeconomic and labor inequalities shape the effectiveness of circular economy policies. Using panel data from 90 countries (2019–2024) combined with global governance indicators, we employ fixed-effects models, instrumental variables, and configurational analysis (fsQCA) to identify causal mechanisms. The results reveal a critical institutional threshold: circular economy policies reduce inequality only in countries with high institutional quality (WGI > 1.39). In contexts with weak institutions or positive Skill Structure Balance (SSB), these policies are regressive. Social protection and digital financial inclusion moderate these effects, acting as buffers against distributional risks. These findings challenge the “automatic social benefits” narrative, suggesting that environmental ambition requires parallel investments in institutional capacity and human capital to achieve a just transition.