Heterogeneous household responses to energy price shocks

Gert Peersman () and Joris Wauters

Energy Economics, 2024, vol. 132, issue C

Abstract: We use survey evidence on reported spending in hypothetical energy price shock scenarios to study novel features of the price elasticity of energy demand and the marginal propensity to consume (MPC) after paying the energy bill. We document several nonlinearities depending on the sign and magnitude of the energy price shock that are economically relevant, including at the extensive and intensive margins. There is also considerable heterogeneity across households. For price increases, low-income families and those planning major home renovations over the next months report a higher price elasticity of energy demand. Conversely, households with more appetite to consume exhibit a lower elasticity. In contrast, MPCs depend on households’ income, saving buffer, financial uncertainty, appetite to consume, and gender of the household head. Yet household characteristics hardly matter when energy prices decline; we only find smaller MPCs for households with a greater saving buffer and younger families. Finally, we show that targeted price subsidies on energy for Belgian low-income households have been much more effective in supporting non-energy consumption than the general VAT reduction on energy prices.

Keywords: Energy shock; Survey experiment; Price elasticity of energy demand; Marginal propensity to consume; Household heterogeneity (search for similar items in EconPapers)
JEL-codes: D12 E21 H31 Q41 Q43 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Heterogeneous Household Responses to Energy Price Shocks (2022)
Working Paper: Heterogeneous household responses to energy price shocks (2022)
Working Paper: Heterogeneous Household Responses to Energy Price Shocks (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:132:y:2024:i:c:s0140988324001294

DOI: 10.1016/j.eneco.2024.107421

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