Circular economy for social welfare in European NUTS 2 regions: Evaluation of circular strategies and income differences

This study advances the understanding of circular economy practices by offering a multidimensional assessment of their social welfare impacts across European NUTS 2 regions. It distinguishes between material recycling and energy recovery while accounting for heterogeneity along the income distribution. We examine the institutional hypothesis that circular economies foster inclusive green development by enhancing income and quality of life, particularly among lower-income groups through new market opportunities in circular niches. Using machine learning for feature selection and ranking, together with Method of Moments Quantile Regression (MM-QREG) that incorporates fixed effects and location and scale shifts, we analyze 323 regions over the period 2010–2022. The results indicate that material recycling significantly improves disposable income and reduces social deprivation, with stronger positive effects at lower income quantiles, whereas energy recovery is associated with more limited or adverse outcomes. The findings illustrate how specific circular economy practices translate into differentiated welfare outcomes and provide guidance for regionally tailored green transition policies.