Redistribution through Income Taxation and Public Utility Pricing in the Presence of Energy Efficiency Considerations

Fabian Feger, Doina Radulescu and Doina Maria Radulescu
Authors registered in the RePEc Author Service: Doina Maria Radulescu

No 7195, CESifo Working Paper Series from CESifo

Abstract: Many OECD countries such as the USA, the UK or Switzerland are concerned with the affordability of utility services and the distributional consequences inherent in the pricing strategy of basic goods and services, such as electricity. However, the effectiveness of the electricity tariff as a redistribution device is questionable in the presence of a progressive income tax schedule. To shed light on this controversy, we structurally estimate a model that combines public utility pricing and income taxation. We employ a large panel data set on about 105,000 households in the Swiss Canton of Bern from 2008 to 2013, including detailed energy consumption and household income and tax payment characteristics. While the theoretical model predicts that electricity prices should be subsidised in the presence of purely income redistribution concerns, we find a positive mark-up of 49%, in our data. This suggests that, in practice, the government is concerned with energy conservation as well as income redistribution.

Keywords: redistribution; public utility pricing; energy; asymmetric information (search for similar items in EconPapers)
JEL-codes: D12 D31 H21 H23 H24 L94 L98 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ene, nep-eur, nep-pbe, nep-pub and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7195

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