Circular Economy And Productivity In A Large Developing Country: Empirical Evidence From Indonesia

Circular economy aims to improve the used-resources efficiency and effectiveness holistically, thereby self-sustained and sustainable. Such concept promotes an all-inclusive productivity worldview. Yet, a question remains to what extent does the circular economy practices have impact on firms' productivity, particularly in developing economies where there are conditions that are not necessarily in line with textbook rules that are mostly based on the developed economies paradigm. As the concept of the circular economy is a relatively new focus of research, it makes this paper to be the first empirically investigating the impact of circular economy practices on firms productivity in Indonesia. The open paradigm of circular economy that is non-restrictive and adaptable to the social and ecological environment depending on the availability of resources (low-tech to high-tech) and markets (small to large), makes circular economy approach, theoretically, is effective to improve productivity sustainably with limited resources available as in developing economies such as Indonesia. The study also contributes by highlighting the challenge on limited data availability related to measuring the circular economy measurements. We find the evidence in support of circular economy practices positively affecting firms productivity. However, the effects differ across sectors. What also important is that the dynamics of other deteminant variables of productivity shows that there is unique treats of firms that implement circular economy practices which makes them different and more resilient compared to other general firms.