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The Electric Gini: Income Redistribution through Energy Prices

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  • Arik Levinson
  • Emilson Silva

Abstract

In theory, regulators concerned about inequality will deviate from efficient two-part tariffs, charging lower-than-efficient fixed monthly fees and higher-than-efficient per-kilowatt-hour prices. To quantify that relationship, we develop a measure of the redistributive extent of utility tariffs: the "electric Gini." Utilities with higher electric Ginis shift more costs from households using relatively little electricity to households using more. In practice, US utilities whose ratepayers have more unequal incomes have higher electric Ginis. But electricity demand is only loosely correlated with income, which means that electricity prices are an indirect and ineffective policy for countering income inequality.

Suggested Citation

  • Arik Levinson & Emilson Silva, 2022. "The Electric Gini: Income Redistribution through Energy Prices," American Economic Journal: Economic Policy, American Economic Association, vol. 14(2), pages 341-365, May.
    • Handle: RePEc:aea:aejpol:v:14:y:2022:i:2:p:341-65
    DOI: 10.1257/pol.20200543
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    Cited by:

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    7. Ren, Weihang & Guan, Yongpei & Qiu, Feng & Levin, Todd & Heleno, Miguel, 2025. "Energy justice and equity: A Review of definitions, measures, and practice in policy, planning, and operations," Renewable and Sustainable Energy Reviews, Elsevier, vol. 222(C).
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    10. Wietelman, Derek & Wichman, Casey & Brent, Daniel A., 2025. "Conservation and Distributional Consequences of Pricing Scarce Water During Droughts," RFF Working Paper Series 25-07, Resources for the Future.
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    12. Scott P. Burger & Christopher R. Knittel & Ignacio J. Perez-Arriaga & Ian Schneider & Frederik vom Scheidt, 2020. "The Efficiency and Distributional Effects of Alternative Residential Electricity Rate Designs," The Energy Journal, , vol. 41(1), pages 199-240, January.
    13. Ivan Faiella & Luciano Lavecchia, 2021. "Households' energy demand and the effects of carbon pricing in Italy," Questioni di Economia e Finanza (Occasional Papers) 614, Bank of Italy, Economic Research and International Relations Area.
    14. Leslie, Gordon W. & Pourkhanali, Armin & Roger, Guillaume, 2024. "Is the clean energy transition making fixed-rate electricity tariffs regressive?," Journal of Environmental Economics and Management, Elsevier, vol. 127(C).
    15. Sirin, Selahattin Murat & Camadan, Ercument & Erten, Ibrahim Etem & Zhang, Alex Hongliang, 2023. "Market failure or politics? Understanding the motives behind regulatory actions to address surging electricity prices," Energy Policy, Elsevier, vol. 180(C).
    16. Ivan Ackermann & Doina Radulescu & Doina Maria Radulescu, 2024. "Unveiling the Energy Price Tag – Assessing the Degree of Regressivity of Household Energy Expenditures Among European Countries," CESifo Working Paper Series 11390, CESifo.
    17. Lisa Bagnoli & Salvador Bertomeu & Antonio Estache & Maria Vagliasindi, 2020. "Are the Poor Better Off with Public or Private Utilities ?A Survey of the Academic Evidence on Developing Economies," Working Papers ECARES 2020-24, ULB -- Universite Libre de Bruxelles.
    18. Chlond, Bettina & Goeschl, Timo & Kesternich, Martin, 2025. "Money versus procedures — Evidence from an energy efficiency assistance program," Journal of Environmental Economics and Management, Elsevier, vol. 130(C).
    19. Scott P. Burger & Christopher R. Knittel & Ignacio J. Pérez-Arriaga & Ian Schneider & Frederik vom Scheidt, 2019. "The Efficiency and Distributional Effects of Alternative Residential Electricity Rate Designs," NBER Working Papers 25570, National Bureau of Economic Research, Inc.
    20. Ansarin, Mohammad & Ghiassi-Farrokhfal, Yashar & Ketter, Wolfgang & Collins, John, 2022. "A review of equity in electricity tariffs in the renewable energy era," Renewable and Sustainable Energy Reviews, Elsevier, vol. 161(C).
    21. Wichman, Casey, 2024. "Efficiency, Equity, and Cost-Recovery Trade-Offs in Municipal Water Pricing," RFF Working Paper Series 24-18, Resources for the Future.
    22. Edwards, Eric & Sutherland, Sara A. & Thayer, Anastasia W., 2023. "Teaching Price Elasticity of Demand and Marginal Analysis using Household Water Pricing," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 5(3), September.
    23. Feger, Fabian & Radulescu, Doina, 2020. "When environmental and redistribution concerns collide: The case of electricity pricing," Energy Economics, Elsevier, vol. 90(C).

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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