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Evaluating the Impact of Energy Poverty in a Multidimensional Setting

We study the relationship between energy poverty and subjective well-being by combining objective and subjective indicators in a multidimensional energy poverty index (MEPI). Using the Italian release of the European Survey on Income and Living Conditions, we first assess the identification power of this index vis-à-vis standard 'affordability' indicators. Subsequently, we use the MEPI in a simultaneous bivariate ordered probit model accounting for the endogeneity between subjective well-being and energy poverty arising from considering subjective indicators. We find a clear additional role by the subjective indicator in the identification of the energy-poor and a relatively low overlapping degree between MEPI and affordability measures. Likewise, econometric estimations detect sizeable and statistically significant negative effects on life satisfaction as the severity level of the MEPI rises. In contrast, virtually no effects are found with affordability indicators. The impact is substantially smaller when the MEPI only considers the subset of objective indicators.

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Keywords: Multidimensional energy poverty, Subjective well-being, Limited dependent variable methods, Welfare analysis, Fuel poverty

DOI: 10.5547/01956574.42.1.edel

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Published in Volume 42, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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