SITE Seminar | The political consequences of energy price shocks - Evidence from Germany

Working paper title: The political consequences of energy price shocks - Evidence from Germany

By: Jan Christoph Steckel

Abstract

We study the political consequences of energy price shocks for households, using electricity price increases in Germany during the 2022–2023 energy price crisis as an example. Building on original four-wave panel survey data, we exploit plausibly exogenous and staggered variation in the timing of electricity instalment increases generated by the German billing system. We find that higher electricity payments causally reduce support for liberal democratic institutions. Average effects on support for the far-right populist party Alternative für Deutschland (AfD) are modest, but we uncover pronounced heterogeneity. Among individuals who have low trust in the proper use of public funds, electricity price shocks significantly increase AfD support. We interpret these findings through a belief-based mechanism in which voters revise assessments of mainstream parties’ competence when experiencing salient economic shocks. This mechanism implies that temporary electricity price shocks can generate persistent political effects by increasing the relative appeal of committed populist alternatives—a populist trap. Our results highlight how salient household electricity price shocks can sustainably undermine democratic support.