No. 800 - To eat or to heat: are energy bills squeezing people's spending?

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by Andrea Colabella, Luciano Lavecchia, Valentina Michelangeli and Raffaella PicoOctober 2023

This paper evaluates the financial risks associated with the increases in energy prices (electricity and natural gas) observed since mid-2021 using a microsimulation model for the financial vulnerability of Italian households. The analysis takes into account the effects of consumption recomposition by estimating how the demand for energy goods varies depending on prices.

The amount of electricity and gas consumed decreases as a result of price hikes. This reduces households' well-being, but enables them to maintain disposable income for other expenses. It follows that the financial vulnerability of households increases only moderately, much less so than it would under the assumption that energy consumption does not react to rising prices.

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