IDEAS home Printed from
   My bibliography  Save this paper

The Quadrilemma of a Small Open Circular Economy Through a Prism of the 9R Strategies


  • Patrick Grüning

    (Latvijas Banka & Vilnius University)

  • Justina Banionienė

    (Kaunas University of Technology)

  • Lina Dagilienė

    (Kaunas University of Technology)

  • Michael Donadelli

    (University of Brescia)

  • Marcus Jüppner

    (Deutsche Bundesbank, Goethe University)

  • Renatas Kizys

    (University of Southampton)

  • Kai Lessmann

    (Potsdam Institute for Climate Impact Research)


The Circular Economy (CE) challenges the traditional linear economy model to arrive at a sustainable economy that minimizes resource use, its negative environmental impact, and dependency on resource imports. We develop a multi-sector dynamic stochastic general equilibrium small open economy model with endogenous adoption of exogenous foreign technology innovations, endogenous environmental quality, and CE elements, comprising recyclable waste as well as recycling and refurbishing sectors. We analyze the model-implied impulse response functions with respect to several economic shocks and conduct a rich scenario-based analysis, for which the scenarios are derived from the 9R strategies. We find important trade-offs to be considered by the economy with respect to circularity, trade, environment, and growth – the four dimensions of the quadrilemma of a small open circular economy. We find that none of the six shocks considered and in none of the eight scenarios analyzed the quadrilemma can be resolved. However, a positive shock to the price of energy or a lower energy share in one of the two intermediate goods sectors provide benefits to three out of four dimensions of the quadrilemma.

Suggested Citation

  • Patrick Grüning & Justina Banionienė & Lina Dagilienė & Michael Donadelli & Marcus Jüppner & Renatas Kizys & Kai Lessmann, 2021. "The Quadrilemma of a Small Open Circular Economy Through a Prism of the 9R Strategies," Bank of Lithuania Working Paper Series 96, Bank of Lithuania.
  • Handle: RePEc:lie:wpaper:96

    Download full text from publisher

    File URL:
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    1. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    2. Giutini, Ron & Gaudette, Kevin, 2003. "Remanufacturing: The next great opportunity for boosting US productivity," Business Horizons, Elsevier, vol. 46(6), pages 41-48.
    3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    4. World Commission on Environment and Development,, 1987. "Our Common Future," OUP Catalogue, Oxford University Press, number 9780192820808.
    5. Kirchherr, Julian & Piscicelli, Laura & Bour, Ruben & Kostense-Smit, Erica & Muller, Jennifer & Huibrechtse-Truijens, Anne & Hekkert, Marko, 2018. "Barriers to the Circular Economy: Evidence From the European Union (EU)," Ecological Economics, Elsevier, vol. 150(C), pages 264-272.
    6. Walter R. Stahel, 2016. "The circular economy," Nature, Nature, vol. 531(7595), pages 435-438, March.
    7. Gavazzoni, Federico & Santacreu, Ana Maria, 2020. "International R&D spillovers and asset prices," Journal of Financial Economics, Elsevier, vol. 136(2), pages 330-354.
    8. García-Barragán, Juan F. & Eyckmans, Johan & Rousseau, Sandra, 2019. "Defining and Measuring the Circular Economy: A Mathematical Approach," Ecological Economics, Elsevier, vol. 157(C), pages 369-372.
    9. Kumar, Sameer & Putnam, Valora, 2008. "Cradle to cradle: Reverse logistics strategies and opportunities across three industry sectors," International Journal of Production Economics, Elsevier, vol. 115(2), pages 305-315, October.
    10. Cainelli, Giulio & D’Amato, Alessio & Mazzanti, Massimiliano, 2020. "Resource efficient eco-innovations for a circular economy: Evidence from EU firms," Research Policy, Elsevier, vol. 49(1).
    11. Larry G. Epstein & Stanley E. Zin, 2013. "Substitution, risk aversion and the temporal behavior of consumption and asset returns: A theoretical framework," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 12, pages 207-239, World Scientific Publishing Co. Pte. Ltd..
    12. Ravi Bansal & Marcelo Ochoa, 2011. "Temperature, Aggregate Risk, and Expected Returns," NBER Working Papers 17575, National Bureau of Economic Research, Inc.
    13. Donadelli, M. & Jüppner, M. & Riedel, M. & Schlag, C., 2017. "Temperature shocks and welfare costs," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 331-355.
    14. Willi Haas & Fridolin Krausmann & Dominik Wiedenhofer & Markus Heinz, 2015. "How Circular is the Global Economy?: An Assessment of Material Flows, Waste Production, and Recycling in the European Union and the World in 2005," Journal of Industrial Ecology, Yale University, vol. 19(5), pages 765-777, October.
    15. Woolridge, Anne C. & Ward, Garth D. & Phillips, Paul S. & Collins, Michael & Gandy, Simon, 2006. "Life cycle assessment for reuse/recycling of donated waste textiles compared to use of virgin material: An UK energy saving perspective," Resources, Conservation & Recycling, Elsevier, vol. 46(1), pages 94-103.
    16. Christos Karydas & Anastasios Xepapadeas, 2019. "Pricing climate change risks: CAPM with rare disasters and stochastic probabilities," CER-ETH Economics working paper series 19/311, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    17. Kannan Govindan & Mia Hasanagic, 2018. "A systematic review on drivers, barriers, and practices towards circular economy: a supply chain perspective," International Journal of Production Research, Taylor & Francis Journals, vol. 56(1-2), pages 278-311, January.
    18. Viktors Ajevskis & Kristine Vitola, 2011. "Housing and Banking in a Small Open Economy DSGE Model," Working Papers 2011/03, Latvijas Banka.
    19. Pelin Demirel & Gamze Ozturk Danisman, 2019. "Eco‐innovation and firm growth in the circular economy: Evidence from European small‐ and medium‐sized enterprises," Business Strategy and the Environment, Wiley Blackwell, vol. 28(8), pages 1608-1618, December.
    20. Howard Kung & Lukas Schmid, 2015. "Innovation, Growth, and Asset Prices," Journal of Finance, American Finance Association, vol. 70(3), pages 1001-1037, June.
    21. Alan Murray & Keith Skene & Kathryn Haynes, 2017. "The Circular Economy: An Interdisciplinary Exploration of the Concept and Application in a Global Context," Journal of Business Ethics, Springer, vol. 140(3), pages 369-380, February.
    22. Kirchherr, Julian & Reike, Denise & Hekkert, Marko, 2017. "Conceptualizing the circular economy: An analysis of 114 definitions," Resources, Conservation & Recycling, Elsevier, vol. 127(C), pages 221-232.
    23. William D. Nordhaus, 1992. "The 'DICE' Model: Background and Structure of a Dynamic Integrated Climate-Economy Model of the Economics of Global Warming," Cowles Foundation Discussion Papers 1009, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Myrto Kasioumi & Thanasis Stengos, 2023. "A Circular Model of Economic Growth and Waste Recycling," Circular Economy and Sustainability,, Springer.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Concepción Garcés-Ayerbe & Pilar Rivera-Torres & Inés Suárez-Perales & Dante I. Leyva-de la Hiz, 2019. "Is It Possible to Change from a Linear to a Circular Economy? An Overview of Opportunities and Barriers for European Small and Medium-Sized Enterprise Companies," IJERPH, MDPI, vol. 16(5), pages 1-15, March.
    2. Donadelli, Michael & Grüning, Patrick & Jüppner, Marcus & Kizys, Renatas, 2021. "Global temperature, R&D expenditure, and growth," Energy Economics, Elsevier, vol. 104(C).
    3. Aro, Joerabell Lourdes & Selerio, Egberto & Evangelista, Samantha Shane & Maturan, Fatima & Atibing, Nadine May & Ocampo, Lanndon, 2022. "Fermatean fuzzy CRITIC-CODAS-SORT for characterizing the challenges of circular public sector supply chains," Operations Research Perspectives, Elsevier, vol. 9(C).
    4. Oana Dobre-Baron & Alina Nițescu & Dorina Niță & Cătălin Mitran, 2022. "Romania’s Perspectives on the Transition to the Circular Economy in an EU Context," Sustainability, MDPI, vol. 14(9), pages 1-26, April.
    5. Mohammed Sakib Uddin & Khaled Mahmud & Bijoy Mitra & Al-Ekram Elahee Hridoy & Syed Masiur Rahman & Md Shafiullah & Md. Shafiul Alam & Md. Ismail Hossain & Mohammad Sujauddin, 2023. "Coupling Nexus and Circular Economy to Decouple Carbon Emissions from Economic Growth," Sustainability, MDPI, vol. 15(3), pages 1-21, January.
    6. Durán-Romero, Gemma & López, Ana M. & Beliaeva, Tatiana & Ferasso, Marcos & Garonne, Christophe & Jones, Paul, 2020. "Bridging the gap between circular economy and climate change mitigation policies through eco-innovations and Quintuple Helix Model," Technological Forecasting and Social Change, Elsevier, vol. 160(C).
    7. Millar, Neal & McLaughlin, Eoin & Börger, Tobias, 2019. "The Circular Economy: Swings and Roundabouts?," Ecological Economics, Elsevier, vol. 158(C), pages 11-19.
    8. Graziela Darla Araujo Galvão & Steve Evans & Paulo Sergio Scoleze Ferrer & Marly Monteiro de Carvalho, 2022. "Circular business model: Breaking down barriers towards sustainable development," Business Strategy and the Environment, Wiley Blackwell, vol. 31(4), pages 1504-1524, May.
    9. Gilbert Silvius & Aydan Ismayilova & Vicente Sales-Vivó & Micol Costi, 2021. "Exploring Barriers for Circularity in the EU Furniture Industry," Sustainability, MDPI, vol. 13(19), pages 1-25, October.
    10. Georgios Lanaras-Mamounis & Anastasios Kipritsis & Thomas A. Tsalis & Konstantinos Ι. Vatalis & Ioannis E. Nikolaou, 2022. "A Framework for Assessing the Contribution of Firms to Circular Economy: a Triple-Level Approach," Circular Economy and Sustainability,, Springer.
    11. Rodríguez-Espíndola, Oscar & Cuevas-Romo, Ana & Chowdhury, Soumyadeb & Díaz-Acevedo, Natalie & Albores, Pavel & Despoudi, Stella & Malesios, Chrisovalantis & Dey, Prasanta, 2022. "The role of circular economy principles and sustainable-oriented innovation to enhance social, economic and environmental performance: Evidence from Mexican SMEs," International Journal of Production Economics, Elsevier, vol. 248(C).
    12. Ewa Mazur-Wierzbicka, 2021. "Towards Circular Economy—A Comparative Analysis of the Countries of the European Union," Resources, MDPI, vol. 10(5), pages 1-25, May.
    13. Hervé Corvellec & Alison F. Stowell & Nils Johansson, 2022. "Critiques of the circular economy," Journal of Industrial Ecology, Yale University, vol. 26(2), pages 421-432, April.
    14. Yamoah, Fred A. & Sivarajah, Uthayasankar & Mahroof, Kamran & Peña, Iker González, 2022. "Demystifying corporate inertia towards transition to circular economy: A management frame of reference," International Journal of Production Economics, Elsevier, vol. 244(C).
    15. OCOLIȘANU Andreea & DOBROTĂ Gabriela & AGÂRBICEANU Marcela Simona, 2022. "The Implications Of The Circular Economy On Sustainable Economic Growth," Management of Sustainable Development, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 14(1), pages 16-21, June.
    16. Michael Donadelli & Marcus Jüppner & Antonio Paradiso & Christian Schlag, 2021. "Computing Macro-Effects and Welfare Costs of Temperature Volatility: A Structural Approach," Computational Economics, Springer;Society for Computational Economics, vol. 58(2), pages 347-394, August.
    17. Grüning, Patrick, 2018. "Heterogeneity in the internationalization of R&D: Implications for anomalies in finance and macroeconomics," Finance Research Letters, Elsevier, vol. 26(C), pages 132-138.
    18. Hsieh, Chung-Chi & Lathifah, Artya, 2022. "Ordering and waste reuse decisions in a make-to-order system under demand uncertainty," European Journal of Operational Research, Elsevier, vol. 303(3), pages 1290-1303.
    19. Ozili, Peterson K & Opene, Francis, 2022. "The role of banks in the circular economy," MPRA Paper 113466, University Library of Munich, Germany.
    20. Michael Donadelli & Marcus Jüppner & Antonio Paradiso & Christian Schlag, 2019. "Temperature Volatility Risk," Working Papers 2019:05, Department of Economics, University of Venice "Ca' Foscari".

    More about this item


    Circular economy; Small open economy; Recycling; Refurbishing; Endogenous economic growth; Technology adoption; General equilibrium; Energy;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lie:wpaper:96. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Aurelija Proskute (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.