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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.

Suggested Citation

  • 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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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Pothen, Frank & Tovar Reaños, Miguel Angel, 2018. "The Distribution of Material Footprints in Germany," Ecological Economics, Elsevier, vol. 153(C), pages 237-251.
    2. 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).
    3. Tovar Reanos, Miguel, 2020. "Car ownership and the distributional and environmental policies to reduce driving behavior," Papers WP673, Economic and Social Research Institute (ESRI).
    4. 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).
    5. 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.
    6. Curtis, John & Tovar, Miguel Angel & Grilli, Gianluca, 2019. "Access to and consumption of natural gas: spatial and sociodemographic drivers," Papers WP639, Economic and Social Research Institute (ESRI).

    More about this item

    Keywords

    Household energy demand; Demand system estimation; Energy taxes; Demand elasticities; Social tariffs;

    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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