The Macroeconomic and Redistributive Effects of Shielding Consumers from Rising Energy Prices: the French Experiment

Francois Langot, Selma Malmberg, Fabien Tripier and Jean-Olivier Hairault

No 2305, CEPREMAP Working Papers (Docweb) from CEPREMAP

Abstract: French government implemented a subsidy on the purchase of energy products to shield consumers from rising energy prices during the energy crisis that started in 2021. We develop a new-Keynesian business cycle model with heterogeneous agents to assess the macroeconomic and redistributive effects of this energy subsidy. We propose a new methodology for ex-ante policy evaluation based on the government forecasts embedded in budgetary law. From a macroeconomic perspective, this policy supports economic growth and curbs inflation, but slightly rises debt-to-GDP ratio. In terms of redistribution, this policy contains the rise in consumption inequalities even if the subsidy is not targeted at poorest households. We compare the effects of this policy with alternative policies such as a re-indexation of wages on prices or a redistributive policy targeted at the most vulnerable households.

Keywords: HANK model; Energy crisis; Tariff shield; Policy evaluation (search for similar items in EconPapers)
Pages: 41 pages
Date: 2023-05
New Economics Papers: this item is included in nep-dge and nep-ene
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:cpm:docweb:2305

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