Examining the Effect of an Energy Price Shock on Trust and Life Satisfaction: Short-Run Evidence from The Netherlands

Abstract

This paper investigates how a shock in energy prices affects reported levels of generalized trust and life-satisfaction within the context of the Netherlands. Weutilize a longitudinal panel of the Dutch population to investigate whether individuals with their energy bills not included in their rental payments report heterogeneous levels of generalized trust and life-satisfaction compared to individuals with their energy bills included in their rental payments, employing a Difference-in-Differences approach. The results suggests that those with excluded energy bill payments reports decreasing levels of both generalized trust and life-satisfaction, and the effect on life-satisfaction is heterogeneous across sample stratification. Moreover are the results on generalized trust not fully robust with regards to changed outcome measurements and increased time-period, while the results on life-satisfaction are more robust to changes in outcome measurements and increased time-period. We contribute to the strand of literature that investigates how price-changes and negative monetary dynamics affect generalized trust and life-satisfaction, while we also present policymakers with evidence on which individuals are more affected by increased energy prices.