Item

Abstract

In this analysis, we examine the heterogeneous welfare effects of various crisis relief programs, financed either through distortionary taxes or public debt. To provide a quantitative evaluation of the 2022 energy crisis, we compare the performance of targeted and untargeted transfers and energy price subsidies while considering different financing schemes within a Dynamic Stochastic General Equilibrium (DSGE) model calibrated to the German economy. Our results show that no single measure can resolve the underlying trade-offs. In terms of welfare, low-income and high- income households prefer different policies and financing schemes. Low-income households prefer debt-financed instruments, as these help them smooth consumption in response to the energy price shock. In contrast, high-income households strongly prefer tax-financed interventions. Our analysis highlights the importance of labor market effects and explicitly assessing welfare.