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The Macroeconomic and Redistributive Effects of Shielding Consumers from Rising Energy Prices: the French Experiment

Author

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  • Langot, François
  • Malmberg, Selma
  • Tripier, Fabien
  • Hairault, Jean-Olivier
Abstract
French government implemented a subsidy on the purchase of energy products to shield consumers from rising energy prices during the energy crisis that started in 2021. We develop a new-Keynesian business cycle model with heterogeneous agents to assess the macroeconomic and redistributive effects of this energy subsidy. We propose a new methodology for ex-ante policy evaluation based on the government forecasts embedded in budgetary law. From a macroeconomic perspective, this policy supports economic growth and curbs inflation, but slightly rises debt-to-GDP ratio. In terms of redistribution, this policy contains the rise in consumption inequalities even if the subsidy is not targeted at poorest households. We compare the effects of this policy with alternative policies such as a re-indexation of wages on prices or a redistributive policy targeted at the most vulnerable households.

Suggested Citation

  • Langot, François & Malmberg, Selma & Tripier, Fabien & Hairault, Jean-Olivier, 2023. "The Macroeconomic and Redistributive Effects of Shielding Consumers from Rising Energy Prices: the French Experiment," CEPREMAP Working Papers (Docweb) 2305, CEPREMAP.
    • Handle: RePEc:cpm:docweb:2305
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    File URL: http://www.cepremap.fr/depot/docweb/docweb2305.pdf
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    References listed on IDEAS

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    Cited by:

    1. Christian Bayer & Alexander Kriwoluzky & Gernot J. Müller & Fabian Seyrich, 2023. "Hicks in HANK: Fiscal Responses to an Energy Shock," Discussion Papers of DIW Berlin 2056, DIW Berlin, German Institute for Economic Research.
    2. Hinterlang, Natascha & Jäger, Marius & Stähler, Nikolai & Strobel, Johannes, 2024. "On curbing the rise in energy prices: An examination of different mitigation approaches," Discussion Papers 09/2024, Deutsche Bundesbank.
    3. Segarra, Ignacio & Atanasova, Christina & Figuerola-Ferretti, Isabel, 2024. "Electricity markets regulations: The financial impact of the global energy crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 93(C).

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    Keywords

    HANK model; Energy crisis; Tariff shield; Policy evaluation;
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