Household-Level Responses to the European Energy Crisis

Lassi Ahlvik, Tuomas Kaariaho, Matti Liski and Vehviläinen, Iivo

No 19972, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies household responses to a sharp energy price increase. Using Finnish household-level microdata from the 2022 European Energy Crisis, we exploit quasi-random contract expiration dates to identify adjustments across key margins: energy use, earnings, financial distress, and residual consumption. High- and middle-income households primarily reduce electricity use and modestly increase earnings, whereas low-income groups lack these adjustment channels, facing rising defaults and cutbacks in other spending. Households with an anticipation period adjust electricity use in advance, softening the impacts of the price shock. We apply these results to quantify the incidence of a hypothetical carbon price.

JEL-codes: H23 Q41 Q54 (search for similar items in EconPapers)
Date: 2025-02
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