European Circular Economy Structural Typology Based on Multivariate Analysis of Latent Dimensions and Transition Pathways

ABSTRACT Transition towards a circular economy has become a strategic priority for the European Union, although Member States continue to exhibit substantial differences in economic performance, resource efficiency and circular economy implementation. Understanding these structural differences is essential for designing effective policy interventions. This study identifies latent dimensions of circular economy performance and develops a statistically validated structural typology of circular economy transition pathways across the EU‐27. The analysis uses a balanced panel of 378 country‐year observations covering 27 European Union Member States during 2010–2023, based on six harmonised Eurostat indicators. Following logarithmic transformation and Z ‐score standardisation, the analytical framework combines Principal Component Analysis, Horn's Parallel Analysis, K‐means++ clustering, cluster validation criteria (Elbow, Silhouette, Calinski–Harabasz and Davies–Bouldin indices), post hoc statistical tests, and temporal robustness analysis. Two latent dimensions explain 79.53% of total variance, representing economic and resource‐energy performance and circular economy transition intensity. These dimensions identify four statistically distinct country groups, revealing persistent structural differences in the way Member States combine productive efficiency with circular economy implementation. Robustness analyses confirm the stability of both the latent structure and resulting typology across alternative validation procedures and sub‐period estimations. Findings demonstrate that circular economy development follows multiple structural pathways rather than a single convergence pattern. The proposed framework provides an evidence‐based foundation for designing differentiated circular economy policies tailored to distinct groups of Member States while offering a robust approach for analysing structural heterogeneity across the European Union.