Ethnic diversity, energy poverty and the mediating role of trust: Evidence from household panel data for Australia

Abstract

Abstract Energy poverty is now a major concern on the public policy agenda in many countries. However, evidence on the determinants of energy poverty is relatively scant. Our study contributes to the debate on the determinants of energy poverty by being the first to examine the impact of ethnic diversity on household energy poverty. Using 12 waves of longitudinal data from the Household, Income and Labour Dynamics in Australia (HILDA) survey, we find that, in Australia, ethnic diversity is positively associated with energy poverty. Our preferred instrumented estimates suggest that a standard deviation increase in ethnic diversity is associated with a 0.103–0.422 standard deviation increase in energy poverty, depending on how energy poverty is measured. This finding is generally robust to alternative ways of measuring ethnic diversity and energy poverty. We identify trust as an important channel through which ethnic diversity operates and point to the need for policies that engender social capital in multicultural societies as a means to harness the benefits of diversity.