Applied Micro Seminar : Every Tuesday
Time: 12:15 pm – 13:30 pm
Date: 28th of May
Room : 3001

Kate Smith (LSE/ISF) – Distributional impact of the European energy crisis

Abstract :

We estimate the distributional effects of the unprecedented rise in European energy prices over 2021-2023. Using bank account data for a sample of UK households we show that there were significant energy consumption falls, consistent with an average price elasticity of around -0.4, with proportionally larger responses for those with high pre-crisis spending. We also document evidence of a labeling effect associated energy bill rebates, part of the government’s policy response. Using estimates of a flexible model of energy demand, we show that the introduction of a large energy price subsidy, along with bill rebates, limited welfare losses, though the labeling effect created an inefficiency that, if avoided, would have reduced average monetary losses by a further 33\%. We show that the UK government’s reliance on a relatively large subsidy can be rationalized by a social welfare function that places high weight on avoiding large monetary

Organizers:
Benoît SCHMUTZ (Pôle d’économie du CREST)
Clément MALGOUYRES (Pôle d’économie du CREST)
Sponsors:
CREST