The role of physical capital stock in shaping recycling performance: evidence from developed economies

Abstract This study examines how the structure of physical capital accumulation shapes recycling performance in advanced economies. Using annual panel data for 16 OECD countries from 1995 to 2019, we estimate short- and long-run effects using fixed-effects and cross-sectionally augmented ARDL (CS-ARDL) models that account for cross-sectional dependence, and we assess distributional heterogeneity using quantile regression and quantile ARDL. Results consistently show a positive association between public capital stock, measured by government-funded waste collection, sorting, recycling infrastructure, and the recycling ratio in both the short and long run. By contrast, private capital stock shows a persistent negative relationship with recycling, consistent with capital deepening in material- and energy-intensive activities, where waste-generating throughput expands faster than recovery capacity. Among controls, population density is negative in the short run but turns positive in the long run, while GDP is robustly negative across specifications. Heterogeneity analysis indicates that public capital is most effective in low- and medium-recycling economies. In contrast, the adverse effect of private capital strengthens toward the upper tail of the recycling distribution. We show that the direction of capital formation is a structural constraint on circular-economy transition. The study’s contribution is to bring capital-stock composition into the economics of waste management, showing that “more investment” is not equivalent to “better recycling” unless the direction of capital formation changes. Policy implications follow directly: scale up targeted public infrastructure investment and reorient private capital toward circular-economy activities through extended producer responsibility, eco-design requirements, and fiscal/regulatory incentives that reward waste prevention, reuse, and high-quality recycling.