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The Electric Gini: Income Redistribution through Energy Prices

Author

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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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    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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