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Effect of energy poverty on household savings and net worth

Opoku Adabor

Published 2025 in Studies in Economics and Finance

ABSTRACT

Although Australia is a developed country, it experiences a surprisingly high rate of energy poverty, drawing increasing policy attention to its broader social and economic impacts. This study aims to add to that growing body of literature by investigating how energy poverty affects household savings and net worth, offering new insights into its economic consequences at the household level. This study uses panel fixed effects and pooled ordinary least squares (OLS) models as the main estimation techniques. The fixed effects model accounts for unobserved, time-invariant household characteristics, isolating the impact of energy poverty on household savings and net worth. The pooled OLS model provides a broader cross-sectional perspective. Together, they offer robust insights into the relationship between energy poverty and household savings. The overall findings reveal a clear pattern: energy poverty significantly reduces household savings and net worth. This result holds consistently across multiple instrumental variable strategies and alternative measures of energy poverty. Importantly, the analysis shows that household income and locus of control act as key pathways, mediating the impact of energy poverty on savings. The effect of energy poverty on households’ savings and net worth is examined.

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