The Impact of Energy Poverty on Sleep Quality: Evidence from Germany and Australia

Abstract: This paper explores the impact of energy poverty on sleep quality. The nature of this relationship remains unknown and yet is important for the public policy debate on the well-being consequences of energy poverty. This paper attempts to fill this gap by using two longitudinal large-scale micro surveys representative of the Australian and German population, the Household, Income, and Labor Dynamics in Australia (HILDA) and the German Socio-Economic Panel (GSOEP). To provide a differentiated view, the paper adopts six measures of energy poverty, reflecting both objective (expenditure-based) and subjective (self-assessed) approaches, and including a composite measure of energy poverty which is in line with the notion that energy poverty is a multidimensional phenomenon. We use three different sleep quality dimensions: satisfaction with sleep, sleep disturbances and sleep deprivation. Identifying and quantifying causal effects poses a significant empirical challenge because energy poverty is endogenous. To address this issue, we search for instruments that account for exogenous variations in energy poverty. Two alternative set of instruments are used. Firstly, we compute average energy poverty scores by region-year-gender cells. Aggregate fluctuations in these indicators are valid sources of variations, for they are correlated with the likelihood of energy poverty, but not with individual sleep quality. Secondly, we use electricity prices as an external source of variation of energy poverty. The results show that energy poverty impacts negatively sleep quality, although the estimates differ across dimensions.