Heterogeneous Household Responses to Energy Price Shocks

Gert Peersman () and Joris Wauters

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

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 find that the price elasticity is significantly larger for price increases than price decreases and diminishes heavily for greater price hikes. The elasticity is also larger for households undertaking major home renovations over the next months, and smaller for families with more appetite to consume. For the MPC, we document greater responses of non-energy consumption when energy prices increase compared to price decreases. MPCs are also larger for households with low income and/or saving buffer, and households reporting their future financial situation is difficult to predict. Finally, we show that targeted price subsidies on energy for Belgian low-income households are much more effective in supporting non-energy consumption than the general VAT reduction on energy prices.

JEL-codes: D12 E21 H31 Q41 Q43 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2022-12
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (6)

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http://wps-feb.ugent.be/Papers/wp_22_1058.pdf (application/pdf)

Related works:
Journal Article: Heterogeneous household responses to energy price shocks (2024)
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:rug:rugwps:22/1058

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