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Energy Affordability and Subjective Well-Being: Evidence for European Countries

Abstract:
This paper uses data on the life satisfaction of more than 100,000 individuals in 21 European countries from 2002 to 2011, to study the relationship between subjective well-being and the affordability for households of electricity, heating oil and natural gas. We find that energy prices have statistically and economically significant effects on subjective well-being. The effect sizes are smaller than but comparable to the effects of important personal factors of well-being. Effects above average are found in individuals from the lowest income quartile. In addition, effects are strongest at times when required energy expenditures can be expected to be high. The empirical results are consistent with the prediction that greater fuel poverty implies a greater effect of energy prices on well-being.

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Energy Specializations: Energy and the Economy – Energy as a Productive Input; Renewables – Policy and Regulation; Electricity – Markets and Prices ; Nuclear Power – Markets and Prices; Natural Gas – Markets and Prices; Petroleum – Markets and Prices for Crude Oil and Products

JEL Codes:
O13 - Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Q52 - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
D42 - Market Structure, Pricing, and Design: Monopoly
L13 - Oligopoly and Other Imperfect Markets

Keywords: Energy affordability, Energy price, Fuel poverty, Welfare, Subjective well-being

DOI: 10.5547/01956574.38.3.hwel

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Published in Volume 38, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.