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Household energy prices and inequality: Evidence from German microdata based on the EASI demand system

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  • Tovar Reaños, Miguel A.
  • Wölfing, Nikolas M.

Abstract

This paper studies the distributional effects of rising energy costs for households. In contrast to most of the previous literature, our specification differentiates between electricity and heating demand and still models other consumption goods in realistic detail. We use a yet unexplored data-set on household expenditures in Germany and extend the recently developed EASI demand system for the analysis of inequality and welfare at the individual and social level. The EASI system reveals non-linearity of Engel curves which – when neglected – can lead to biased estimates of distributional effects. We find that increases in heating prices are more regressive than those in electricity. Furthermore, current proposals for social tariffs are found to be less effective than targeted compensation schemes.

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  • Tovar Reaños, Miguel A. & Wölfing, Nikolas M., 2018. "Household energy prices and inequality: Evidence from German microdata based on the EASI demand system," Energy Economics, Elsevier, vol. 70(C), pages 84-97.
    • Handle: RePEc:eee:eneeco:v:70:y:2018:i:c:p:84-97
    DOI: 10.1016/j.eneco.2017.12.002
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    Cited by:

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    2. Pothen, Frank & Tovar Reaños, Miguel Angel, 2018. "The Distribution of Material Footprints in Germany," Ecological Economics, Elsevier, vol. 153(C), pages 237-251.
    3. Tovar Reaños, Miguel & Lynch, Muireann Á., 2019. "Distributional impacts of carbon taxation and revenue recycling: a behavioural microsimulation," Papers WP626, Economic and Social Research Institute (ESRI).
    4. Andr'es Ram'irez-Hassan & Alejandro L'opez-Vera, 2021. "Semi-parametric estimation of the EASI model: Welfare implications of taxes identifying clusters due to unobserved preference heterogeneity," Papers 2109.07646, arXiv.org.
    5. Jacques Fotso, Willy & Mvogo, Gregory & Bidiasse, Honoré, 2023. "Household access to the public electricity grid in Cameroon: Analysis of connection determinants," Utilities Policy, Elsevier, vol. 81(C).
    6. Peñasco, Cristina & Anadón, Laura Díaz, 2023. "Assessing the effectiveness of energy efficiency measures in the residential sector gas consumption through dynamic treatment effects: Evidence from England and Wales," Energy Economics, Elsevier, vol. 117(C).
    7. Richard S. J. Tol, 2023. "Navigating the energy trilemma during geopolitical and environmental crises," Papers 2301.07671, arXiv.org.
    8. Moz-Christofoletti, Maria Alice & Pereda, Paula Carvalho, 2021. "Winners and losers: the distributional impacts of a carbon tax in Brazil," Ecological Economics, Elsevier, vol. 183(C).
    9. van der Ploeg, Frederick & Rezai, Armon & Tovar Reanos, Miguel, 2022. "Gathering support for green tax reform: Evidence from German household surveys," European Economic Review, Elsevier, vol. 141(C).
    10. Maria Alice Moz-Christofoletti & Paula Carvalho Pereda, 2021. "Winners and losers: the distributional impact of a carbon tax in Brazil," Working Papers, Department of Economics 2021_08, University of São Paulo (FEA-USP).
    11. Tovar Reaños, Miguel A. & Lynch, Muireann Á., 2022. "Measuring carbon tax incidence using a fully flexible demand system. Vertical and horizontal effects using Irish data," Energy Policy, Elsevier, vol. 160(C).
    12. Wisdom Dogbe & Cesar Revoredo-Giha, 2021. "Nutritional and Environmental Assessment of Increasing the Content of Fruit and Vegetables in the UK Diet," Sustainability, MDPI, vol. 13(3), pages 1-23, January.
    13. Böhringer, Christoph & García-Muros, Xaquín & González-Eguino, Mikel, 2022. "Who bears the burden of greening electricity?," Energy Economics, Elsevier, vol. 105(C).
    14. Thomas Douenne, 2018. "The vertical and horizontal distributive effects of energy taxes," Policy Papers 2018.05, FAERE - French Association of Environmental and Resource Economists.
    15. Tovar Reaños, Miguel A., 2021. "Fuel for poverty: A model for the relationship between income and fuel poverty. Evidence from Irish microdata," Energy Policy, Elsevier, vol. 156(C).
    16. Jan, Muhammad Zain & Ullah, Kafait & Abbas, Faisal & Khalid, Hassan Abdullah & Bajwa, Tariq M., 2023. "Barriers to the adoption of social welfare measures in the electricity tariff structure of developing countries: A case of Pakistan," Energy Policy, Elsevier, vol. 179(C).
    17. Reaños, Miguel Tovar & De Bruin, Kelly & Meier, David & Yakut, Aykut Mert, 2022. "Economic and Distributional Impacts of turning the Value-Added Tax into a Carbon Tax," Papers WP739, Economic and Social Research Institute (ESRI).
    18. Tovar Reanos, Miguel, 2020. "Car ownership and the distributional and environmental policies to reduce driving behavior," Papers WP673, Economic and Social Research Institute (ESRI).
    19. Curtis, John & Tovar, Miguel Angel & Grilli, Gianluca, 2020. "Access to and consumption of natural gas: Spatial and socio-demographic drivers," Energy Policy, Elsevier, vol. 143(C).
    20. Jacobs, Bas & van der Ploeg, Frederick, 2019. "Redistribution and pollution taxes with non-linear Engel curves," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 198-226.
    21. Julia Bock-Schappelwein & Claudia Kettner, 2023. "Households Vulnerable to Rising Energy Prices. TransFair-AT Research Brief #1," WIFO Studies, WIFO, number 70682, April.
    22. Tovar Reaños, Miguel & Lynch, Muireann Á., 2019. "Carbon taxation in Ireland: distributional effects of revenue recycling policies," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    23. Tovar Reaños, Miguel A., 2021. "Floods, flood policies and changes in welfare and inequality: Evidence from Germany," Ecological Economics, Elsevier, vol. 180(C).
    24. Böhringer, Christoph & Landis, Florian & Tovar, Miguel, 2022. "The Incidence of Carbon Pricing: From Input-Output via Microsimulation to General Equilibrium," VfS Annual Conference 2022 (Basel): Big Data in Economics 264067, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    Household energy demand; Demand system estimation; Energy taxes; Demand elasticities; Social tariffs;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D39 - Microeconomics - - Distribution - - - Other
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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