In advanced countries, more than 70% of the population lives in urbanized areas. This fact causes that low population density urban areas are expanding resulting from promotion of car transportation, and hollowing out in centers of cities with more energy consuming city structure. These phenomenon increase discharges of carbon dioxide, waste, and other pollutants, thus a new city structure should be explored. Among others, compact city has recently been paid attention. The concept of compact city does not emphasize the physical city size but it rather implies the balanced state of a city between environmental burden and city growth with appropriate city functions. This article focuses on a compact city. And as a first step for realization of a compact city, this paper aims to construct a computable general equilibrium (CGE) model internalizing waste recycling. Usually, CGE models have been constructed for a national or prefectural level economy, but our model has daringly been developed for a small region's economy. Thus the input-output table of the economy itself must be estimated. Taking account of this point, this paper presents the estimation of an economic and material circulation accounting matrix, and then shows some simulation analyses of promotion of waste recycling.