IDEAS home Printed from https://ideas.repec.org/p/enp/wpaper/eprg1628.html
   My bibliography  Save this paper

Fuel Poverty and Well-Being: A Consumer Theory and Stochastic Frontier Approach

Author

Listed:
  • Ana Rodríguez-Álvarez

    () (Oviedo Efficiency Group, Dept of Economics, University of Oviedo)

  • Luis Orea

    (Oviedo Efficiency Group, Dept. of Economics, University of Oviedo)

  • Tooraj Jamasb

    (Durham University Business School)

Abstract

Evidence and conventional wisdom suggest that general poverty has a negative effect on the well-being of individuals. However, the mechanisms through which this effect occurs are not well-understood through economic approach. In this paper, we analyse the influence of general and fuel poverty as well as the social dimension through peer comparison on the subjective well-being of households. We develop a novel approach to analyse fuel poverty and well-being based on consumer theory. Individual preferences are modelled using indifference curves and a distance function where the preferences of individuals are affected by their poverty status. We use the survey data from the official Spanish Life Condition Survey for 2013, which contains over 16,608 observations on household members. The results show that both general and fuel poverty influence the reference indifference curve but that individuals also compare themselves with their peers. The proposed model also allows us to corroborate how general and fuel poverty affect well-being and how effective policies can be designed to improve social welfare.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Ana Rodríguez-Álvarez & Luis Orea & Tooraj Jamasb, 2016. "Fuel Poverty and Well-Being: A Consumer Theory and Stochastic Frontier Approach," Working Papers EPRG 1628, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
  • Handle: RePEc:enp:wpaper:eprg1628
    as

    Download full text from publisher

    File URL: https://www.eprg.group.cam.ac.uk/wp-content/uploads/2016/11/1628-Text.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Tooraj Jamasb & Helena Meier, 2010. "Energy Spending and Vulnerable Households," Working Papers EPRG 1101, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Philipp Biermann, 2016. "How Fuel Poverty Affects Subjective Well-Being: Panel Evidence from Germany," Working Papers V-395-16, University of Oldenburg, Department of Economics, revised Oct 2016.
    3. Martin Binder & Tom Broekel, 2012. "Happiness No Matter the Cost? An Examination on How Efficiently Individuals Reach Their Happiness Levels," Journal of Happiness Studies, Springer, vol. 13(4), pages 621-645, August.
    4. Euan Phimister, Esperanza Vera-Toscano and Deborah Roberts, 2015. "The Dynamics of Energy Poverty: Evidence from Spain," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    5. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    6. Welsch, Heinz & Ferreira, Susana, 2014. "Environment, Well-Being, and Experienced Preference," International Review of Environmental and Resource Economics, now publishers, vol. 7(3-4), pages 205-239, December.
    7. Waddams Price, Catherine & Brazier, Karl & Wang, Wenjia, 2012. "Objective and subjective measures of fuel poverty," Energy Policy, Elsevier, vol. 49(C), pages 33-39.
    8. Tooraj Jamasb & Helena Meier, 2010. "Household Energy Expenditure and Income Groups: Evidence from Great Britain," Working Papers EPRG 1003, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    9. Deller, David, 2018. "Energy affordability in the EU: The risks of metric driven policies," Energy Policy, Elsevier, vol. 119(C), pages 168-182.
    10. Hideyuki Mizobuchi, 2014. "Measuring World Better Life Frontier: A Composite Indicator for OECD Better Life Index," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(3), pages 987-1007, September.
    11. COELLI, Tim, 2000. "On the econometric estimation of the distance function representation of a production technology," LIDAM Discussion Papers CORE 2000042, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    12. Roberts, Deborah & Vera-Toscano, Esperanza & Phimister, Euan, 2015. "Fuel poverty in the UK: Is there a difference between rural and urban areas?," Energy Policy, Elsevier, vol. 87(C), pages 216-223.
    13. Roberts, Deborah & Vera-Toscano, Esperanza & Phimister, Euan, 2015. "Energy poverty in the UK: Is there a difference between rural and urban areas?," 89th Annual Conference, April 13-15, 2015, Warwick University, Coventry, UK 204213, Agricultural Economics Society.
    14. Dorothée Charlier & Bérangère Legendre, 2016. "Fuel Poverty: A Composite Index Approach," Policy Papers 2016.06, FAERE - French Association of Environmental and Resource Economists.
    15. Orea, Luis & Zofío, José L., 2017. "A primer on the theory and practice of efficiency and productivity analysis," Efficiency Series Papers 2017/05, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    16. David G. Blanchflower & Andrew J. Oswald, 2004. "Money, Sex and Happiness: An Empirical Study," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 393-415, October.
    17. Romero-Jordán, Desiderio & del Río, Pablo & Peñasco, Cristina, 2016. "An analysis of the welfare and distributive implications of factors influencing household electricity consumption," Energy Policy, Elsevier, vol. 88(C), pages 361-370.
    18. Moore, Richard, 2012. "Definitions of fuel poverty: Implications for policy," Energy Policy, Elsevier, vol. 49(C), pages 19-26.
    19. Raffaele Miniaci & Carlo Scarpa & Paola Valbonesi, 2014. "Fuel poverty and the energy benefits system: The Italian case," IEFE Working Papers 66, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    20. Papada, Lefkothea & Kaliampakos, Dimitris, 2016. "Measuring energy poverty in Greece," Energy Policy, Elsevier, vol. 94(C), pages 157-165.
    21. Angus Deaton, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," Review of Economic Studies, Oxford University Press, vol. 46(3), pages 391-405.
    22. Legendre, Bérangère & Ricci, Olivia, 2015. "Measuring fuel poverty in France: Which households are the most fuel vulnerable?," Energy Economics, Elsevier, vol. 49(C), pages 620-628.
    23. Bennett, M & Cooke, D & Catherine Waddams-Price, 2002. "Left out in the cold? New energy tariffs, low-income households and the fuel poor," Fiscal Studies, Institute for Fiscal Studies, vol. 23(2), pages 167-194, June.
    24. Timothy K. M. Beatty & Laura Blow & Thomas F. Crossley, 2014. "Is there a ‘heat-or-eat’ trade-off in the UK?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 177(1), pages 281-294, January.
    25. Kumbhakar, Subal C., 2011. "Estimation of production technology when the objective is to maximize return to the outlay," European Journal of Operational Research, Elsevier, vol. 208(2), pages 170-176, January.
    26. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
    27. Maciej Lis & Katarzyna Salach & Konstancja Swiecicka, 2016. "Heterogeneity of the fuel poor in Poland – quantification and policy implications," IBS Working Papers 08/2016, Instytut Badan Strukturalnych.
    28. Cordero, José Manuel & Salinas-Jiménez, Javier & Salinas-Jiménez, M Mar, 2017. "Exploring factors affecting the level of happiness across countries: A conditional robust nonparametric frontier analysis," European Journal of Operational Research, Elsevier, vol. 256(2), pages 663-672.
    29. Caudill, Steven B & Ford, Jon M & Gropper, Daniel M, 1995. "Frontier Estimation and Firm-Specific Inefficiency Measures in the Presence of Heteroscedasticity," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 105-111, January.
    30. Maciej Lis & Agata Miazga & Katarzyna Salach, 2016. "Location, location, location. What accounts for regional variation of fuel poverty in Poland?," IBS Working Papers 09/2016, Instytut Badan Strukturalnych.
    31. Lawson, Rob & Williams, John & Wooliscroft, Ben, 2015. "Contrasting approaches to fuel poverty in New Zealand," Energy Policy, Elsevier, vol. 81(C), pages 38-42.
    32. Helena Meier, Tooraj Jamasb, and Luis Orea, 2013. "Necessity or Luxury Good? Household Energy Spending and Income in Britain 1991-2007," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    33. Xavier Ramos & Jacques Silber, 2005. "On The Application Of Efficiency Analysis To The Study Of The Dimensions Of Human Development," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(2), pages 285-309, June.
    34. Bradshaw, Jonathan & Hutton, Sandra, 1983. "Social policy options and fuel poverty," Journal of Economic Psychology, Elsevier, vol. 3(3-4), pages 249-266, September.
    35. David Dorn & Justina Fischer & Gebhard Kirchgässner & Alfonso Sousa-Poza, 2007. "Is It Culture or Democracy? The Impact of Democracy and Culture on Happiness," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 82(3), pages 505-526, July.
    36. Liddell, Christine & Morris, Chris, 2010. "Fuel poverty and human health: A review of recent evidence," Energy Policy, Elsevier, vol. 38(6), pages 2987-2997, June.
    37. Heinz Welsch & Philipp Biermann, 2017. "Energy Affordability and Subjective Well-Being: Evidence for European Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    38. Florian Fizaine & Sondès Kahouli, 2019. "On the power of indicators: how the choice of fuel poverty indicator affects the identification of the target population," Applied Economics, Taylor & Francis Journals, vol. 51(11), pages 1081-1110, March.
    39. Scarpellini, Sabina & Rivera-Torres, Pilar & Suárez-Perales, Inés & Aranda-Usón, Alfonso, 2015. "Analysis of energy poverty intensity from the perspective of the regional administration: Empirical evidence from households in southern Europe," Energy Policy, Elsevier, vol. 86(C), pages 729-738.
    40. repec:aen:journl:eeep4_1_phimister is not listed on IDEAS
    41. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
    42. Parmeter, Christopher F. & Kumbhakar, Subal C., 2014. "Efficiency Analysis: A Primer on Recent Advances," Foundations and Trends(R) in Econometrics, now publishers, vol. 7(3-4), pages 191-385, December.
    43. Dale W. Jorgenson & Lawrence J. Lau, 1975. "The Structure of Consumer Preferences," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 4, number 1, pages 49-101, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Llorca, Manuel & Rodriguez-Alvarez, Ana & Jamasb, Tooraj, 2020. "Objective vs. subjective fuel poverty and self-assessed health," Energy Economics, Elsevier, vol. 87(C).
    2. Harker Steele, Amanda J. & Bergstrom, John C., 2018. "Does Energy Efficiency Effect Energy Security? An Analysis of Energy Efficient Upgrades and Household Energy Security," 2018 Annual Meeting, August 5-7, Washington, D.C. 274186, Agricultural and Applied Economics Association.
    3. Elena Druică & Zizi Goschin & Rodica Ianole-Călin, 2019. "Energy Poverty and Life Satisfaction: Structural Mechanisms and Their Implications," Energies, MDPI, Open Access Journal, vol. 12(20), pages 1-20, October.
    4. Awaworyi Churchill, Sefa & Smyth, Russell & Farrell, Lisa, 2020. "Fuel poverty and subjective wellbeing," Energy Economics, Elsevier, vol. 86(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rodríguez-Álvarez, A. & Orea, L. & Jamasb, T., 2016. "Fuel poverty and well-being: a consmer theory and stochastic fronteir approach," Cambridge Working Papers in Economics 1668, Faculty of Economics, University of Cambridge.
    2. Llorca, Manuel & Rodriguez-Alvarez, Ana & Jamasb, Tooraj, 2020. "Objective vs. subjective fuel poverty and self-assessed health," Energy Economics, Elsevier, vol. 87(C).
    3. Romero, José Carlos & Linares, Pedro & López, Xiral, 2018. "The policy implications of energy poverty indicators," Energy Policy, Elsevier, vol. 115(C), pages 98-108.
    4. Hache, Emmanuel & Leboullenger, Déborah & Mignon, Valérie, 2017. "Beyond average energy consumption in the French residential housing market: A household classification approach," Energy Policy, Elsevier, vol. 107(C), pages 82-95.
    5. Awaworyi Churchill, Sefa & Smyth, Russell & Farrell, Lisa, 2020. "Fuel poverty and subjective wellbeing," Energy Economics, Elsevier, vol. 86(C).
    6. Ntaintasis, E. & Mirasgedis, S. & Tourkolias, C., 2019. "Comparing different methodological approaches for measuring energy poverty: Evidence from a survey in the region of Attika, Greece," Energy Policy, Elsevier, vol. 125(C), pages 160-169.
    7. Belaïd, Fateh, 2018. "Exposure and risk to fuel poverty in France: Examining the extent of the fuel precariousness and its salient determinants," Energy Policy, Elsevier, vol. 114(C), pages 189-200.
    8. Heindl, Peter & Schüßler, Rudolf, 2019. "A deprivation-based assessment of energy poverty: Conceptual problems and application to Germany," ZEW Discussion Papers 19-036, ZEW - Leibniz Centre for European Economic Research.
    9. Alem, Yonas, 2013. "Relative Standing and Life-Satisfaction: Does Unobserved Heterogeneity Matter?," Working Papers in Economics 579, University of Gothenburg, Department of Economics.
    10. Silvia Maja Melzer & Ruud J. Muffels, 2012. "Migrant's Pursuit of Happiness: The Impact of Adaption, Social Comparison and Relative Deprivation; Evidence from a 'Natural' Experiment," SOEPpapers on Multidisciplinary Panel Data Research 448, DIW Berlin, The German Socio-Economic Panel (SOEP).
    11. Senakpon F. A. Dedehouanou & Johan Swinnen & Miet Maertens, 2013. "Does Contracting Make Farmers Happy? Evidence from Senegal," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59, pages 138-160, October.
    12. Poruschi, Lavinia & Ambrey, Christopher L., 2018. "Densification, what does it mean for fuel poverty and energy justice? An empirical analysis," Energy Policy, Elsevier, vol. 117(C), pages 208-217.
    13. Agbim, Chinelo & Araya, Felipe & Faust, Kasey M. & Harmon, Dana, 2020. "Subjective versus objective energy burden: A look at drivers of different metrics and regional variation of energy poor populations," Energy Policy, Elsevier, vol. 144(C).
    14. Alem, Yonas & Köhlin, Gunnar, 2012. "Life Satisfaction in Urban Ethiopia: Trends and determinants," Working Papers in Economics 548, University of Gothenburg, Department of Economics.
    15. Cordero, José Manuel & Salinas-Jiménez, Javier & Salinas-Jiménez, M Mar, 2017. "Exploring factors affecting the level of happiness across countries: A conditional robust nonparametric frontier analysis," European Journal of Operational Research, Elsevier, vol. 256(2), pages 663-672.
    16. Roberta Distante, 2013. "Subjective Well-Being, Income and Relative Concerns in the UK," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(1), pages 81-105, August.
    17. Zhang, Dayong & Li, Jiajia & Han, Phoumin, 2019. "A multidimensional measure of energy poverty in China and its impacts on health: An empirical study based on the China family panel studies," Energy Policy, Elsevier, vol. 131(C), pages 72-81.
    18. Byela Tibesigwa & Martine Visser & Brennan Hodkinson, 2016. "Effects of Objective and Subjective Income Comparisons on Subjective Wellbeing," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(1), pages 361-389, August.
    19. Kearns, Ade & Whitley, Elise & Curl, Angela, 2019. "Occupant behaviour as a fourth driver of fuel poverty (aka warmth & energy deprivation)," Energy Policy, Elsevier, vol. 129(C), pages 1143-1155.
    20. Fengyu Wu, 2020. "An Examination of the Effects of Consumption Expenditures on Life Satisfaction in Australia," Journal of Happiness Studies, Springer, vol. 21(8), pages 2735-2771, December.

    More about this item

    Keywords

    Distance functions; fuel poverty; general poverty; indifference curve; stochastic frontier analysis; subjective well-being;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:enp:wpaper:eprg1628. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ruth Newman). General contact details of provider: http://edirc.repec.org/data/jicamuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.